Re:Are Buy Now Pay Laters the Next Bubble?
by josephcsible on Sunday July 03, 2022 @10:21PM
(#31972858)
That equation is definitely wrong, but it's not the one that I've used anywhere.
In your scenarios, your cash flow is -$1000 at time 0 if you pay with cash.
Re:Are Buy Now Pay Laters the Next Bubble?
by josephcsible on Monday July 04, 2022 @03:07PM
(#31980649)
Okay, I think I see where you're coming from now. With the 2% reward from the credit card, using it today is -$980 today, and cash is -$1000 today. If you do the math to see what interest rate you'd need for paying cash to be the better option, you do indeed get an infinite APR. This matches with common sense: if your net cash flow is zero at all future times either way, you're always better off paying $980 today rather than $1000, no matter what interest rates are.
Yes, by your logic it is literally an infinite APR. $200 numerator / 0 years denominator. Doesn’t that imply that maybe your formula has some holes in it and this is a fundamentally different transaction (a take rate rather than an interest rate) than what you’re characterizing it as?