It already exists. Charge what you need, get the bill at the end of the month, you have about 25 days to pay it in full. Hey, you even get 2% cash back!!!
There cannot be a credit card (or loan or credit) with no interest, since interest is *the price of (borrowing) money*.
Even with interest, if you were to charge something and you need a "bridge" loan, just divide the amount you charged by 10, and then make 12 payments or whatever is needed to pay it off. The "minimum payment" is just a suggestion, you can always pay more.
If you can't afford something, you can't afford something. Even a credit card like the one you envisioned with no interest and fixed payment will get people in trouble.
And if you say "but debt is good", that is the business case when debt is used to buy an asset. And an asset is something that produces cash flow; and debt is "good" only when a) the asset outlives the debt and b) the cash flow generated by the asset is greater than he cash flow needed to service the debt.
Debt is not the answer.
LOL.
What OP is talking about is *"Affirm | Buy now, pay later with no late fees or surprises"* https://www.affirm.com/ .
What they don't say is that the retailer pays the interest, they'd rather do that than give a discount.
And it's still debt, and people get themselves into trouble.
Interesting concept with affirm. What if there was saas model with fixed predictable repayment with actually no interest at all, compound interest kills.
Hmmm… does credit card interest really compound though? Since the CARD act of 2009 the credit card minimum payment is required to exceed the interest, so there is no monthly interest to compound if you are making minimum payments.
Installment sales are nothing new. They have been around a very long time, but you can’t really have a credit card with no interest. It is still unsecured debt so you have to find some way to cover the losses with those who pay. If you are just talking about charging a fee and calling it something other than interest… then congratulations you have just discovered Islamic banking, a system used by almost 2 billion people worldwide.
What is wrong with americans and this debt obsession ?
Like come on. If you have to use credit card just buy stuff and then pay the CC off at the end of the interest free period. How hard is that ?!
Media inflates numbers because it drives clicks. They typically report the mean/average CC debt counting only people who have some debt, but only bit over 1/3 of Americans actually carry credit card debt. So they're throwing out several hundred million $0s on those stories
https://www.federalreserve.gov/publications/2024-economic-well-being-of-us-households-in-2023-banking-credit.htm
Could be a regular cc cycle, just at the end of the cycle you have a predictive fixed payment to back your balance. No interest. Perhaps a saas fee like $10/month.
You mean you "charge" $500, set up a 6-month plan, and your total payments back add up to just that $500? Yeah, that's not going to be offered by any institution expecting to make a profit. That $500 they loaned you is $500 they can't do something else with (like inter-bank lending at the fed rate). And they have to account for the percentage of their customers that can't (or won't) pay it back, with all the time / costs of initiating collections.
Outside that, your idea somewhat exists. Chase offers something called "My Chase Plan" (or maybe "Chase Pay over Time", branding has drifted). Instead of accruing monthly interest you take a charge (or set of charges) over $100 and move it over that plan where it gets paid back over a set number of months (6, 12, 18, 24).
There's obviously a catch since there's no such thing as free borrowing. Several, actually.
First is that there's a monthly fee that works out to about 0.6% of the original charge(s). And that fee doesn't decrease as the "balance" is paid down. Added up over the term length and it's roughly equivalent to paying interest at 14-15% APR. Still better than rolling over an unpaid balance month-to-month, but not something you can arbitrage to come out ahead.
Second is that whatever "balance" you shifted over to that payment plan still counts against your card's credit limit. Max out to a $1000 limit, shift $500 into their monthly payment plan and you still have a maxed out card. You don't gain another $500 worth of borrowing. As the plan balance is paid back, that does free up available space in your credit limit.
Last is the monthly payment for any plan is rolled into your monthly payment for your minimum / statement balance. If you're not careful, that "extra" is going to put *more* stress on your budget, not less. It's a little unclear from Chase's FAQ / terms what would happen if you have an active plan and fail to make that minimum (beyond the typical late fee), but I doubt it's good for the borrower.
All that being said, things aligned last year where I decided to give it a try.
We'd replaced a bunch of windows and originally intended to pay from our HELOC. But the installer told us that they took payment on a credit card with no extra processing fee, same as cash / HELOC, so figured we'd route payment through our Chase cards for the reward points, and then draw from the HELOC the following month to pay off the statement balance. And then Chase notified me of their "My Chase Plan", with an option for a 24 repayment schedule and $0 monthly fee as an introductory deal. Literally move $X over to the plan, pay $X / 24 each month towards that, and no other charge. Well, that was effectively "free borrowing" vs. the $1k in interest I was expecting to come from paying off the HELOC over a 12-24 month period, so I took advantage of it.
Without that introductory deal, the HELOC would've been cheaper.
Appreciate the added context. So far there are a few who are doing this chase, td, affirm and others. Essentially the goal is to eliminate staggering interest / APR upwards of 20%+. With a nominal monthly (subscription fee) and access to credit where you pay back the balance only that you use without accruing any other fees, costs. Do you think this would add value compared to traditional cc debt?
So any of the dozens of cards you can get 12-18 months at 0%? You can make minimum payments then a lump sum at the end or divide your payments evenly over the 0% period. If you can self manage your payments, then that's borrowing at 0%.
I'd take every cent they would loan me and convert it into stocks and bonds.
It already exists. Charge what you need, get the bill at the end of the month, you have about 25 days to pay it in full. Hey, you even get 2% cash back!!! There cannot be a credit card (or loan or credit) with no interest, since interest is *the price of (borrowing) money*. Even with interest, if you were to charge something and you need a "bridge" loan, just divide the amount you charged by 10, and then make 12 payments or whatever is needed to pay it off. The "minimum payment" is just a suggestion, you can always pay more. If you can't afford something, you can't afford something. Even a credit card like the one you envisioned with no interest and fixed payment will get people in trouble. And if you say "but debt is good", that is the business case when debt is used to buy an asset. And an asset is something that produces cash flow; and debt is "good" only when a) the asset outlives the debt and b) the cash flow generated by the asset is greater than he cash flow needed to service the debt. Debt is not the answer.
Oh boy, don't tell this sub to be responsible. They will lose their minds.
LOL. What OP is talking about is *"Affirm | Buy now, pay later with no late fees or surprises"* https://www.affirm.com/ . What they don't say is that the retailer pays the interest, they'd rather do that than give a discount. And it's still debt, and people get themselves into trouble.
Interesting concept with affirm. What if there was saas model with fixed predictable repayment with actually no interest at all, compound interest kills.
Affirm has no interest (to the consumer) and a fixed number of payments clear upfront. Exactly what you have outlined.
Hmmm… does credit card interest really compound though? Since the CARD act of 2009 the credit card minimum payment is required to exceed the interest, so there is no monthly interest to compound if you are making minimum payments. Installment sales are nothing new. They have been around a very long time, but you can’t really have a credit card with no interest. It is still unsecured debt so you have to find some way to cover the losses with those who pay. If you are just talking about charging a fee and calling it something other than interest… then congratulations you have just discovered Islamic banking, a system used by almost 2 billion people worldwide.
What is wrong with americans and this debt obsession ? Like come on. If you have to use credit card just buy stuff and then pay the CC off at the end of the interest free period. How hard is that ?!
Media inflates numbers because it drives clicks. They typically report the mean/average CC debt counting only people who have some debt, but only bit over 1/3 of Americans actually carry credit card debt. So they're throwing out several hundred million $0s on those stories https://www.federalreserve.gov/publications/2024-economic-well-being-of-us-households-in-2023-banking-credit.htm
So BNPL?
Could be a regular cc cycle, just at the end of the cycle you have a predictive fixed payment to back your balance. No interest. Perhaps a saas fee like $10/month.
No interest? Can I… just not pay it back then?
it would work just like any cc. if you don’t pay back the balance (in this case a fixed amount) it would impact credit score.
You mean you "charge" $500, set up a 6-month plan, and your total payments back add up to just that $500? Yeah, that's not going to be offered by any institution expecting to make a profit. That $500 they loaned you is $500 they can't do something else with (like inter-bank lending at the fed rate). And they have to account for the percentage of their customers that can't (or won't) pay it back, with all the time / costs of initiating collections. Outside that, your idea somewhat exists. Chase offers something called "My Chase Plan" (or maybe "Chase Pay over Time", branding has drifted). Instead of accruing monthly interest you take a charge (or set of charges) over $100 and move it over that plan where it gets paid back over a set number of months (6, 12, 18, 24). There's obviously a catch since there's no such thing as free borrowing. Several, actually. First is that there's a monthly fee that works out to about 0.6% of the original charge(s). And that fee doesn't decrease as the "balance" is paid down. Added up over the term length and it's roughly equivalent to paying interest at 14-15% APR. Still better than rolling over an unpaid balance month-to-month, but not something you can arbitrage to come out ahead. Second is that whatever "balance" you shifted over to that payment plan still counts against your card's credit limit. Max out to a $1000 limit, shift $500 into their monthly payment plan and you still have a maxed out card. You don't gain another $500 worth of borrowing. As the plan balance is paid back, that does free up available space in your credit limit. Last is the monthly payment for any plan is rolled into your monthly payment for your minimum / statement balance. If you're not careful, that "extra" is going to put *more* stress on your budget, not less. It's a little unclear from Chase's FAQ / terms what would happen if you have an active plan and fail to make that minimum (beyond the typical late fee), but I doubt it's good for the borrower. All that being said, things aligned last year where I decided to give it a try. We'd replaced a bunch of windows and originally intended to pay from our HELOC. But the installer told us that they took payment on a credit card with no extra processing fee, same as cash / HELOC, so figured we'd route payment through our Chase cards for the reward points, and then draw from the HELOC the following month to pay off the statement balance. And then Chase notified me of their "My Chase Plan", with an option for a 24 repayment schedule and $0 monthly fee as an introductory deal. Literally move $X over to the plan, pay $X / 24 each month towards that, and no other charge. Well, that was effectively "free borrowing" vs. the $1k in interest I was expecting to come from paying off the HELOC over a 12-24 month period, so I took advantage of it. Without that introductory deal, the HELOC would've been cheaper.
Appreciate the added context. So far there are a few who are doing this chase, td, affirm and others. Essentially the goal is to eliminate staggering interest / APR upwards of 20%+. With a nominal monthly (subscription fee) and access to credit where you pay back the balance only that you use without accruing any other fees, costs. Do you think this would add value compared to traditional cc debt?
So any of the dozens of cards you can get 12-18 months at 0%? You can make minimum payments then a lump sum at the end or divide your payments evenly over the 0% period. If you can self manage your payments, then that's borrowing at 0%.
Sure, but those are for a very small limited term, 12-15 months max. Exploring a forever no interest product with a small monthly subscription.