WE TURNED "PAY IN 4" INTO A COMPETITION... ONE OF US LOST EVERYTHING

Brothers Make A Money Bet

SPEAKER_01 0:00

Say it again? You would fall for it. I have never fallen for anything in my entire life. You ate an entire basket of bath salt just because it was labeled CISA. We agreed, we don't talk about that one.

SPEAKER_00 0:12

Today we're gonna find out which of my brothers is worse with money. And spoiler alert, it's both of them.

SPEAKER_01 0:19

And that was the day when I learned what minimum payment means. Anyway, you'd fall for it. Here's the bet we both use buy now, pay later apps like Klarna and Afterpay. For one shopping trip, whoever ends up further ahead wins.

SPEAKER_02 0:34

And whoever loses has to admit on camera the other one is smarter.

SPEAKER_01 0:39

Forever on the internet, permanently.

SPEAKER_02 0:43

Deal, because unlike you, I don't fall for marketing.

SPEAKER_01 0:46

You cried during the magic show because you thought the assistant was actually cutting off.

SPEAKER_02 0:51

She screamed, Brandon.

What Buy Now Pay Later Is

SPEAKER_00 0:53

Okay, so before either of them actually touches an app, let's explain what they're about to do. Because right now, neither of them understands the game they just agreed to play. Buy now, pay later, takes one purchase and splits it up into smaller pieces. Usually about four payments instead of one big one.

SPEAKER_01 1:12

So it's basically a payment plan?

SPEAKER_00 1:14

It's a loan wearing a payment plan's clothes. The short plans, the four payment ones, can really be zero interest, but only if you pay it back on time. But a lot of these companies do offer longer plans. Months, years even, and those do carry interest. Sometimes they're even worse than a credit card.

SPEAKER_02 1:34

So there's a nice version and a naughty version.

SPEAKER_00 1:37

And they look almost identical at checkout. That's on purpose.

SPEAKER_01 1:41

Okay, but if it's four payments of 30 instead of one payment for 120, that's still 120, right?

SPEAKER_00 1:48

Exactly the same amount, but completely different feeling. That's the point. And it's the first thing you both need to understand before either of you touches any of that.

SPEAKER_01 1:57

Try to keep up. You won't stop a stop sign was a suggestion. It was raining.

How BNPL Companies Profit

SPEAKER_00 2:03

Okay, but here's the part that nobody explains. These companies get paid twice on the same purchase.

SPEAKER_02 2:09

How do you get paid twice off just one thing?

SPEAKER_00 2:12

First payment comes from the store. Every time you check out with one of these apps, the store hands the company a cut, bigger than what a credit card charges. The store's fine with that because people buy more and buy more often when the number in front of them looks smaller.

SPEAKER_01 2:26

So the store is basically paying them to trick me?

SPEAKER_00 2:29

The store is basically paying them to make you spend more. The second payment comes from you. If everyone pays on time, the company still makes money from the store's cut. But a huge amount of their actual profit comes from when people don't pay the store on time. Late fees, and the longer plans have real interest.

SPEAKER_02 2:46

So they kind of need people to mess up?

SPEAKER_00 2:48

They basically built a business that profits either way, but profits way more when you slip. That's not a conspiracy theory. That's just the math of the industry.

SPEAKER_01 2:56

So this whole time, I've been the product?

SPEAKER_00 2:59

Last piece, then you two can go just destroy your finances. Thank you.

Loan Stacking And Credit Risk

SPEAKER_00 3:07

New accounts start small, a tiny limit. Basically nothing. Pay it back on time and they trust you a little bit more and they raise it. Pay it back, they raise it again. It's a ladder.

SPEAKER_02 3:17

Okay, that seems fine.

SPEAKER_00 3:19

It's fine until people climb multiple ladders without telling anyone, including themselves. That's loan stacking. You've got Clarner for one thing, Afterpay for another, and a firm for a third. None of these apps can see that you're using the other ones. Only you can see the whole picture. And most people never really add it up.

SPEAKER_01 3:37

So it sneaks up on.

SPEAKER_00 3:39

And now more of this is showing up on actual credit reports. Which means whatever you buy today on one of those apps can follow you around when you try to rent an apartment or buy a car.

SPEAKER_02 3:50

Good thing that would never happen to me.

SPEAKER_00 3:54

You once forgot our birthday.

SPEAKER_02 3:56

I don't know. I must have been busy that week.

SPEAKER_00 3:58

Okay, fine. Go.

The Shopping Test And Fallout

SPEAKER_00 4:00

Both of you, shop. Let's see what happens.

SPEAKER_02 4:02

New account. This should be smooth sailing. $50? That's not even a real number. That's an insult.

SPEAKER_00 4:10

It's a truss ladder. You're on the bottom run. Everyone starts there.

SPEAKER_02 4:13

Okay, fine. I'll buy one sock.

SPEAKER_01 4:16

A single sock? Did they at least let you pick the good foot?

SPEAKER_02 4:19

It's a completely wearable sock, Brandon.

SPEAKER_01 4:22

Ooh, now we're speaking the same language. Xbox approved. Headphones approved. And a new kayak approved.

SPEAKER_02 4:29

You don't even live near a lake, Brandon.

SPEAKER_01 4:31

I have goals. See, that's four separate $30 problems. I could solve one of them in my sleep.

SPEAKER_00 4:39

That's the checkout trick working on you in real time. I just explained this to you like 30 seconds ago.

SPEAKER_01 4:45

I heard you, but I chose violence anyways. I currently owe nobody anything. My sock is paid in full. Guys, I have five of these apps open right now.

SPEAKER_00 4:55

And do any of them know about the other four?

SPEAKER_01 4:58

No.

SPEAKER_02 4:59

That's loan stacking.

SPEAKER_01 5:00

I was paying attention. Don't do that. Don't do that right now. This is not your moment.

SPEAKER_00 5:05

Check your payment schedule, Brandon.

SPEAKER_01 5:07

Payment two on the kayak was due 11 minutes ago. Sock guy wins. So the kayak, a great decision at the time. Turns out it wasn't the kayak that got me. It was the four other easy payments. Stacked on top of it from apps that had no idea the others existed.

SPEAKER_02 5:29

Meanwhile, I own one sock. Since I was 17, I have excellent credit and I don't live in a garage.

SPEAKER_01 5:37

Like somebody. Turns out he's not thrilled about it. I'm gonna look at exactly how many payments I have due this week. Sat guy wins.

SPEAKER_02 5:58

Say it, Brandon.

SPEAKER_01 5:59

Uh okay, you're smarter than me. Louder! I said it once. That was the deal.

SPEAKER_00 6:04

For the record, he didn't win because he was smart. He went because they only trusted him with $50.

SPEAKER_02 6:10

I still take it.

Rules To Use BNPL Safely

SPEAKER_00 6:12

Here's the full thing. Buy now, pay later, splits one payment into a few little payments that just make the whole transaction feel easier. The company gets paid by the store, and they get paid by you if you let things slip. Your limit grows slowly as you earn their trust, but stacking multiple apps on top of each other is how you ruin it completely. And now it can follow you onto your real credit report.

SPEAKER_01 6:38

Before you hit pay in four, ask if you'd still buy it if all four of the payments came out of your pocket today, right now.

SPEAKER_02 6:45

If the answer's no, the answer's no. We're triple the money. One sock, zero debt, know what you are.

SPEAKER_01 6:51

And I have a kayak with no link. Subscribe.