What you need to know about Affirm’s new debit card

Financial firm Affirm announced Thursday that it will soon begin offering a debit card to consumers that will allow them to make installment payments on any purchase at any merchant.

But consumers should be careful to read the fine print before applying.

Since 2012, Affirm has offered point-of-sale or installment loans on the websites of select retailers, including Casper, Peloton, Walmart, and thousands more. These BNPL financing options allow customers to pay for their purchases at certain retailers in monthly installments, sometimes at a 0% interest rate, although this depends on the individual and the retailer. They are often touted as a cheaper alternative to credit cards.

The new Affirm card takes this system even further. While full details have not been disclosed, consumers will essentially be able to link the card to their existing bank account to pay for their purchases in full, like a typical debit card, or in monthly installments at any retailer, online. or online. -shop. Affirm says the installments are interest-free for “qualifying” purchases, but did not specify what they include.

He has not yet specified which financial company issues the cards.

If the deferred payment option looks a lot like a credit card or line of credit, it’s because it acts like one, says Ted Rossman, analyst at Bankrate. Affirm essentially combines a debit card with a financing plan similar to a credit card, although, notably, without credit card protection or reward points, he says.

The main appeal of the debit card is that it will likely simplify the payment process: cardholders may be able to use the card for all of their purchases at any time, rather than completing a separate application for each purchase. , as this is the case. practice now. And some consumers may qualify for 0% financing, Rossman says.

Others may also see it as a more responsible way to incur debt than a credit card, says Rossman, since the interest rate and repayment cycle are fixed: Consumers know exactly in advance. how much they owe, when they owe it and how many payments they will make. Credit card debt, on the other hand, is unlimited.

“Psychologically, it’s getting better,” Rossman says of going into debt this way. “For some people, it really works. It just depends on what conditions you get.”

Although claims and similar services have been around for years, their popularity has exploded during the pandemic, Rossman says. About 40% of consumers have used a BNPL service at least once, according to a recent survey by Reuters.

But consumers should be careful when using any type of BNPL product, including the debit card, Rossman says. While they advertise transparency and low, interest-free monthly payments, not everyone is eligible for 0% APR on every Affirm loan, and not all retailers offer it.

“The fine print is if you don’t get one of these 0% promotions, and these are very retailer specific, they charge you 10% to 30%,” he says. “I think a lot of these things are hidden in” Oh, it’s only $ 50 a month. “”

Since the average credit card APR is currently 15.99%, per bank rate, consumers could end up spending more through the Affirm installment plan, depending on the APR they’re eligible for.

Plus, displaying the total price, including interest, in monthly installments, as Affirm does, can make a product more affordable than it actually is, says Rossman. Making payments of $ 45.15 for 12 months might seem like a better deal than paying 15% interest for a year on a $ 500 purchase, but they end up costing about the same.

“Affirm does whatever it takes to clarify the terms, but I think the average person just doesn’t get it,” Rossman says.

Still, Rossman recognizes that loans and the next debit card can be helpful for people who use them to finance their purchases responsibly and are wary of credit cards.

“There is a place for that, but you have to be very careful,” he says. “It’s always a debt. You always make a commitment to repay something over time.”

Interested consumers can join the company’s waiting list. The card is expected to officially launch later this year.

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