Between that and many "banks" offering you to "invest" in crypto straight from their mobile apps home page... it seems like they're trying to milk whatever is left in the pockets of the bottom tier
Debt is a powerful tool when used by educated people for legit reasons, buying a new TV or chicken wings isn't one of them.
>Debt is a powerful tool when used by educated people for legit reasons,
Debt is a dangerous tool when used carefully and intelligently. When used carelessly or unintelligently it is a ruinous monster. We live in a world that allegedly is more educated than ever, but I don't think education is sufficient to avoid this pitfall.
Agree re chicken wings but there are plenty of reasonable and responsible credit options for spreading payments for a relatively unusual purchase - at least, not a daily or weekly necessity - like a TV
> Agree re chicken wings but there are plenty of reasonable and responsible credit options for spreading payments for a relatively unusual purchase - at least, not a daily or weekly necessity - like a TV
That stopped being true a long time ago, at least in the US. TVs can be had incredibly cheaply nowadays. A quick Amazon search shows many models available for circa $100. That's like less than a dozen fast food meals.
If you need a TV, save your money and buy one you can afford. A predatory payment plan should not be used.
OK but US really is in a world of its own these for a lot of things. In the UK it's very common to get 0% interest installments.
Which is not to have a go at the US, but to just make the point that buying domestic appliances is not a simple "bad credit" case. Unlike chicken wings.
Not really - for something like a TV you can wait or get a more modest model. And if waiting would take too long then it's probably not a reasonable expense for you.
Sorry no but domestic white goods such as TVs, fridges, laundry appliances, etc are the perfect use case for small credit plans where doing without or "saving up" is a poor alternative, and sensible non-extortionate credit options have been around for literally decades for this reason.
There are obviously external forces that contribute to anyone’s circumstances rich or poor.
But, ultimately, you can only spend as much as you make in income, or go bankrupt. Choosing to tack on an interest payment to your costs is often an unnecessary additional cost for people. That’s true if you’re poor buying a rudimentary TV or rich maxing out credit cards to furnish your mansion.
Since we're already dealing in absurds here, what if one were to Doordash 50 servings of wings as a emergency/backup catering option for a banquet or wedding? That could easily top $500-800. I sure some consumers—including financially secure ones—would appreciate an interest free loan option on that.
Obviously there is also the opposite dark and pessimistic take here, but there are potentially good things as well?
As a financially secure person, why would I want to spend $800 today when I can spend $800 over four months with no penalty? It doesn't make any sense in the slightest, that is unless you're not savvy enough to keep track of your money?
I was mistaken in thinking it was longer than that. If it is only about two months then it's of little value over a conventional CC (depending on when you buy it in your statement cycle).
My example with the wings is an extreme/incidental use-case, and I realize that it'd be atypical to unheard of in practice.
The sort of person who would order wings as their backup catering for a wedding doesn't shouldn't be borrowing for this, one would think. If they did need the loan they were already stretching themselves far too thin for a wedding event.
Well, what if you were in budget, your caterer failed to meet their obligation but aren't paying you back for several business days, and that extra $800 put you just over budget?
This is an extreme/incidental example, and very likely isn't how this feature is going to be used in practice: I realize that.
>The sort of person who would order wings as their backup catering for a wedding doesn't shouldn't be borrowing for this, one would think.
We're splitting hairs over personal opinions on personal finance here.
>Well, what if you were in budget, your caterer failed to meet their obligation but aren't
Ok. This is for someone who is thinking that they need another $500-800 for the backup catering. For them, an extra $800 with no warning is an expense they can't just eat with the change in their pocket either, one presumes. But they're budgeting for a wedding that likely costs upwards of $7500 (all other costs considered), and they're spending that much without being able to set aside another $1000 for last minute incidentals? I think that this cost might just be the sort of bad decision making that we're all talking about rather than a legitimate use case. And that's even allowing for the recovery of the funds from the original caterer.
The net effect is 0 if you're being paid back and paying back on time. How is this any different from putting it on a CC and paying it back on time? What's the big deal here that warrants this level of discussion? Why not let others do them and you do you? Maybe the real bad decision we're all participating in here—myself included—is feeling the need to split hairs over a hypothetical situation about personal opinions on personal finance?
Debt affects everyone, not just the borrower and the lender. When lenders make one bad loan, society can bear that burden and especially so if many of the loans are good loans that serve mutual interest. When most of the loans are bad, taxpayers pay to enforce loan terms (not the lender), then they pay again when the economy melts down (the lender just reincorporates under some other business name). So it is a big deal when someone is proposing an entirely new class of lending, and it does warrant this level of discussion. If anything, it warrants a much more intense level of discussion than what we've seen so far or what we are likely to see.
Your inability to grasp this is disturbing and should come across as some sort of profound warning to everyone.
You've stepped way out of the discussion we were having and are now engaging in sanctimonious grandstanding.
> Your inability to grasp this is disturbing and should come across as some sort of profound warning to everyone.
Way out of line, dude. Now you're insulting my ability to understand things? You think I don't know about all that? Obviously there are plenty of people who don't deserve credit, but there are also plenty who do. I take pride in having an exceptional credit score.
I'd get those wings. And I'd have a 'profound' time sharing them with friends and family making memories.
This is a fundamental misalignment between a business and their customers. The business doesn’t care if the customer can actually afford the product and they’re happy to push off that responsibility to credit card companies or Klarna in this case, but it’s so shortsighted because anyone with two braincells knows that if your customer cannot afford a <$50 purchase without debt, that they can’t afford that thing at all.
In the long run, customers who should have been blocked from purchasing due to lack of funds will instead write bad reviews about their experience being sent to a collector over a cheeseburger and they’ll bounce off your platform.
“Short term profits ruin everything” for 200 Alex!
My (ex-)sister-in-law would have burritos delivered from the Moe's that was a literal (in the middle-aged sense of that word) ten minute walk* from her house. She was not a wealthy person.
This was NOT the fault of DoorDash.
I rarely order food delivery, for all the obvious reasons, but if there is a market for this stupid luxury (assuming cooled fries and a soggy hamburger bun qualify), good on DoorDash.
Food delivery is not addictive, this is on the free agent spendthrifts who care not for tomorrow.
B) They could go buy the cheeseburger themselves. It'll be twice as cheap too. (I've seen DoorDash screenshots on Reddit, it's obscene how much extra they charge)
>This is a fundamental misalignment between a business and their customers. The business doesn’t care if the customer can actually afford the product and they’re happy to push off that responsibility to credit card companies or Klarna in this case, but it’s so shortsighted because anyone with two braincells knows that if your customer cannot afford a <$50 purchase without debt, that they can’t afford that thing at all.
Accepting credit cards theoretically allows businesses to sell to customers that don't have the money. Is this bad, and should we chastise businesses for not limiting themselves to debit payments only?
I low-key have a preference for businesses that don’t take credit, since they’re theoretically operating with lower overhead. (Though in practice this is limited to my barber, and my neighbourhood Vietnamese bakery and Montreal bagel shops.)
To your actual question, credit cards are tricky because a bunch of services are wrapped together in the same product, and there’s no practical way for businesses to accept charge cards and not credit cards. The number of variables and intermediaries here suggest that this is really a job for regulators - probably not to ban selling to customers that don’t have money, but to make it financially unappealing, e.g. by capping APRs, limiting advertising, etc.
They're also likely cheating on their taxes. The cash only places I use frequently pretend to complete transactions on their cash register rather than committing the transaction.
US credit cards, for all their predatory faults, are a competitive marketplace, accessible by anyone able to follow a few steps [0], and provide effectively-free 30-to-60 day loans.
If someone can't get a credit card in the US, I'd question if they have sufficient financial literacy to take on micro-loans.
Credit cards have some brakes because they only extend credit to people they think will pay it back.
Klarna’s marketing pitch is “no credit check”. They then just send an automated ACH to your bank account. If the funds aren’t there they send it over and over, hoping to punish you with returned-payment fees or overdraft fees. It’s quite different than a credit card and significantly more predatory.
(Particularly pernicious is their claim if they do run a credit check it’s only a “soft pull”… what they are doing should be a hard pull and create a new trade line for an installment loan, albeit a bizarre 4 payment 4 week term one. Creditors are legally obligated to report accurate information. Klarna is conspiring not to do so.)
That's what I wonder/worry about with all the various cash/finance apps. I'm no fan of the banks and credit card companies, but at least they're wrapped in regulations that are commonly known and understood. With Joe's Fast Money app, who knows what's backing it or whether there are any rules governing what they can do to you.
>Credit cards have some brakes because they only extend credit to people they think will pay it back.
>Klarna’s marketing pitch is “no credit check”.
No they're not. If you check the fine print you'll see something along the lines of "subject to approval". They're not giving out free money to anyone who fills out a form.
It’s crazier than that. It might be a soft pull or might not be. Whether or not they say it will be a credit check depends on who you are, presumably based on how likely their algorithm thinks you are to turn them down.
I ran into this recently helping someone with their finances who forgot about random Klarna purchases… I worked off of their credit report, and Klarna was just on there at all. (Obviously lesson #1 was “don’t do Klarna and stuff like it, even though it’s zero interest”).
This is one of those things where it makes people feel very smart to dunk on it, but if you think critically for a minute, the behaviors this enables are already available in objectively more harmful ways: credit cards and payday loans.
This makes things better, not worse.
Obviously people wouldn't be doing this ideally, but that's the world we live in, and this isn't some new phenomenon or some sign of the times.
Edit: since it might vary by location, here’s what footnote 6 says for me, in part:
> A $1,000 purchase might cost $181.04 per month over 6 months at 28.99% APR.* *Rate ranges from 7.99%-33.99% APR based on creditworthiness and subject to credit approval…
It appears that a simple bit of corporate 'synergy' camouflage has tricked you into thinking this is not a payday loan. Maybe those dunking on it are on to something.
or maybe it'll help highlight how dependent we've become on credit cards meditating almost every financial transaction.
i distinctly remember ~20 years ago a that a friend bought a cup of coffee using a credit card and we all made fun of him for it because we thought he was trying to show off. "credit cards are for emergencies and big things like plane tickets, not a three dollar coffee".
It's a tough one. To what extent do we need to go to protect people from their own stupidity?
I remember doing something similar about 15 years ago. A pizza place accepted PayPal including a 'pay after delivery' option. This actually resulted in the payment being taken about 7 days after the order was placed and it was a handy way to get some food when I was broke right before pay day (they didn't check your balance before placing the order).
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Is it a bad idea to order takeout on credit - yeah usually it is. But if people want to do it why should we stop them? There are certainly legitimate use cases (e.g. placing a very large order for a group/party and having time to collect from everyone instead of having to front the cash yourself).
As a principle, we don't protect people from their stupidity unless we can profit more from being a nanny.
Anyone can walk into a liquor store and buy enough alcohol to kill themselves or waste all their money at the casino. Who cares about people borrowing money for lunch?
This country absolutely does not care at all for the poor (unless we've built an institution of exploitation disguised as benevolence)
If we are going to extend liability protections to investors, it goes hand in hand that we also tell them they can't run liability free scams, and punish them when they try.
> do we need to go to protect people from their own stupidity
Speed limits, casino rules, food ingredients legislations, weapon and gun legislation… depending on where you live the cursor is between freedom and stupidity protection.
I can easily and happily find alternatives for the exemples you provide. Here in EU the credit (card) culture is way less loanistic: what we call “credit card” are often delayed debit cards and the real credit cards are used by the richest percentiles.
Isn't there at least a little bit of social responsibility where the chances that the real utility is very small?
If the feature was really about parties/large orders, how about enabling it for orders over $100? I don't think this is a real scenario. Otherwise it's just predatory and an anti-consumer dark pattern.
See the current arguments about sports betting, there's some clear evidence that they aren't an entertainment product and there are clear predatory and anti-social product patterns at work.
I don't believe in protecting people from their own stupidity but I also think we should call out blatant net-negative things lke this.
For me, I think the "oh shit, this can't be good" moment came about 10 years ago when I learned that people couldn't afford tires (not wheels/rims, we all know how absurd those are) for their SUVs that cost as much as my house. Back then, I read some long-form article about how they were financing new tires.
Admittedly, doing the same for delivery food is more extreme still, but one wonders what legitimate problem this could ever solve. I suppose there is someone out there who can afford the meal but they're tapped out until payday, and yet I wonder why they don't have an (unused until this point) credit card to tide them over until Friday. Neither savings nor card, something's gone horrendously wrong.
As someone who's been broke and making bad credit decisions to float things along, I'd say it's often a mindset, getting in a mental rut where you just keep doing the same thing because it solves the problem for today.
I'm not talking here about people who are truly poor and have insufficient income, but people who have money coming in and going out but always seem to be a couple months behind. So lots of stuff goes on credit and costs interest, and they pay a lot of late fees and sometimes overdrafts. But they never fall further behind, so they feel like if they could just get over the hump, they'd be okay. And if you look at their numbers, they're right. But if you handed them a couple months' income so they could get caught up, they'd probably be right back in the same situation within a year, because "barely keeping up" feels normal to them, so the difference between that and "in the black" feels like a buffer they can safely spend down.
What it probably takes (what it took for me, anyway) was not just a new job with a regular salary, but a change in mindset, especially starting to keep a budget so I know where every paycheck is going before I get it. I haven't paid a late fee or a dollar in interest (except my mortgage) for five years, and that's saved me thousands of dollars over what I was spending before. Life is expensive when you're broke.
Something has always bugged me about DoorDash. It just seems so wasteful. What does it take to get a chicken sandwich, fries, and a drink to my door? I've never pinpointed the waste, but intuitively, it just feels like there is waste at every point along the chain. So, I've only used the service once--with a gift card.
I have to admit, as a business, DASH has exceeded my expectations. 50% gross margins, high growth, and they recently posted a net profit--barring accounting fuckery. The ratio of sales & marketing to revenue is almost reasonable; I once grouped DASH with sportsbooks as "detrimental sales spend to keep a narrative going... will not end well." In the long run, if the mission is "get food to you conveniently", technology can do amazing things with time.
All of this is a little off topic. Regarding the Klarna partnership, yeah it's a dangerous service that will get misused while having a few beneficial uses. But that's basically all of consumer finance. All consumer debt is some shade of gray, good to bad.
I’ve wondered what the business model is here since klarna always advertises “interest free” loans. That option does exist, but from the actual announcement there’s another loan option - which of course is just a payday loan:
> Pay in Full allows customers to pay for what they love right away using Klarna’s seamless payments experience.
> Pay in 4 allows customers to pay in four equal interest-free installments
> Pay Later allows customers to defer payments to a more convenient time, such as a date that aligns with their paycheck schedules
Edit: I’m understanding now they’re also betting on missed payments just like credit cards. The payday option maybe also be “interest free” - unclear from the press release imo.
AFAIK klarna gets a cut of the payment (similar to interchange fees for credit card payments), so merchants in effect end up subsidizing the interest-free option. It's not any different than credit cards, which you don't pay any interest on if you pay on time.
The business model is essentially the same as credit cards, but with "fees" instead of interest payments. That is to say, Klarna takes a commission from merchants and the rest of their income is from people who didn't pay on time.
If you default on the 4 free interest payments, Klarna or underwriter will impose a 28.99% APR…
> The Klarna Card is issued by WebBank pursuant to a license from Visa U.S.A. Convert any purchase to Pay in 4 issued by Klarna Inc. CA Resident Loans made or arranged pursuant to a California Financing Law license. NMLS #1353190. *28.99% APR applies to all moved or split transactions.
I really hope the cap of interest rates at the federal level gets some momentum. These types of companies need to die off.
Cap on interest? I wouldn’t keep holding your breath wait in for that.
For people borrowing at 30% interest, which includes many credit card holders today (including basically every card issued by a retailer today), if this type of financing wasn’t available, the next best options are just going without. Problem is, some of those people are racking up high interest debt to do things like feed their kids. There’s a lot of collateral damage to just taking credit away from everyone with a score under 750, which is what doing away with high interest options will amount to.
There will always be poverty and there will always be huge wealth.
Even in Soviet Russia and Mao's China, that was true. And nobody can say they didn't try to fix that 'problem.' Virtually the whole would would all agree that we'd prefer to not have it, and so many have made attempts, but no one has eliminated poverty, and those who have made a run at wealth equality the most fervently, like Mao, also killed billions in the process of failing to accomplish it.
My only point is that it's clearly a much harder problem than you pretend it is.
> My only point is that it's clearly a much harder problem than you pretend it is.
Ouch! I am well aware that it is a hard problem.
I am also aware that we are very smart monkeys.
We do not need the social disruption, and material misery among plenty that we have. It is a choice - a negative choice (a choice to take no action) maybe, but a choice nonetheless.
Klarna is a Swedish company, and is one of the biggest players in the online payment market in Sweden. Swedes can run up unsecured debt with the best of them. And yes, you've been able to pay your DoorDash equivalent in Sweden with Klarna for quite a while now, without it ever having made the news.
Like a credit a card, charge the merchant a fee. I think its around 4% which is why i am surprised door dash did it, usually on higher priced goods with more margin.
It's four payments over six weeks. You generally don't pay interest on a purchase with a credit card if you pay it off within six weeks of the purchase.
After the purchase, there's up to four weeks for the statement to close, and then another few weeks for you to pay your balance before you have to pay interest.
But it looks like Klarna accepts credit cards, so I guess this lets you stretch out your cash even longer by combining the two.
4 payments over 8 weeks, so you owe money sooner than you would with a credit card (2 weeks), and credit cards are also interest free assuming you pay in full.
The longer deferred payment option includes interest fees.
Failing to pay immediately puts you up near credit card interest APY (19% to 33%) and includes additional fees (usually $7 fee immediately).
Then the merchant fees are higher as well (3.5% to 6% fees for klarna, 1.5% to 3.5% for visa) and the fixed fee is high (30 cents for Klarna vs 5 to 10 cents for visa), so you'll see additional surcharges on the product.
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If this was designed for orders over a specific amount and targeted things like large catering orders... fine I guess. As is... micro-finance is a nasty form of usury.
In Sweden (the home of Klarna) you've been able to pay for your DoorDash equivalent using Klarna for ages now, and I've never heard of any backlash or even anybody questioning it. If you can pay by credit card, why not Klarna? I'm surprised that in the US, the credit card Mecca of the world, this even moves the needle.
edit: In fact if I was more conspiratorial, I might suggest that this 'backlash' was orchestrated behind the scenes by Master Card and Visa to protect their market share.
When I first heard of this I thought it was kinda crazy, who would do a payment plan to get some overpriced takeout delivered food. But like you pointed out, it's more or less the same as a credit card, which I didn't even think of. I guess credit cards are so normalized and has the option to pay it all off at once. Good point!
In the UK, if the government banned this, they would get accused of being a 'nanny state' and taking candy from babies.
In reality, people on long term sick benefits would use this service to order strong alcohol to be delivered to their door at 11 in the morning on a Monday, with them being three weeks away from their next benefits payout.
Food typically ordered with these services has no nutritional value with money from the local community going to venture capitalists and multinational companies, to keep poor people poor.
There is so much degeneracy to purge and no will in government to do it.
Many years ago (80s) in the UK I remember my family and others had milk tokens to get formula milk or whatever. Each local convenience store used to exchange them for booze or cigs, at a high conversion rate obviously.
>Food typically ordered with these services has no nutritional value with money from the local community going to venture capitalists and multinational companies, to keep poor people poor.
>There is so much degeneracy to purge and no will in government to do it.
Isn't this a reflection of the restaurants in the area, rather than doordash as a platform? If you want to "purge" doordash on the basis that it's "degeneracy", shouldn't you do the same for all the restaurants that are supplying doordash?
>> Food typically ordered with these services has no nutritional value
This is complete nonsense. These services have a huge variety of restaurants and grocery stores. They're really useful for people with limited mobility who need groceries but don't have time to wait for a delivery from a large supermarket. Regardless, if someone wants to order cigarettes and alcohol on them they should be free to without having to account for your personal ethics.
In theory you could order extremely healthy food from these services. In theory these services could be a boon to disabled people that need to order extremely healthy food.
If you are a shareholder you might believe this. But, if you work with vulnerable people that have substance abuse issues and no income other than benefits, you know how it really works and who the customers really are.
Do you have statistics on hand? We know people order healthy food, and people order nutritionally void crap and alcohol. Without data, it's all meaningless conjecture.
Not really, assuming a legit lender that isn't screwing you in the fine print somewhere.
But buying pizza (or almost anything, really) on credit is a bad idea regardless of the lender, unless you have credit that's zero interest if paid off every month, and you're disciplined enough to do that.
Most people posting on HN probably fall into that category. I wonder what percentage of people using DoorDash every day for lunch are that way.
I'm not commenting on the wisdom of buying pizza on credit...I'm just saying that I struggle to see a difference between someone quietly buying pizza at 24.99% interest on their Mastercard and someone using Klarna to do the same thing at the point of purchase.
lol sometimes it is so hard to predict what will show up on HN but the takes of "i used to poor turned it around by my hard work nothing else" crowd is always a hoot
It’s not a bad strategy as a consumer if you order a lot of fast food through DoorDash. It’s an interest-free loan and you might just die before you have to pay it off.
Wouldn't count on that sticking around, I remember when these apps used to market "no tipping" as a feature. Now there's a giant tip screen front and center in the UI for completed orders.
Debt is a powerful tool when used by educated people for legit reasons, buying a new TV or chicken wings isn't one of them.