Ask HN: Would You Pay?

[dafounder]

Hey HN community, I'm conducting some research for a startup idea and would like to ask the community a question.

Let's say you're renting a car, and there is a $100 hold that is placed on your credit card for the duration of the rental. If you had the option to pay 9% of the $100 deposit, so $9 upfront to not have the $100 hold placed on your card during the rental, would you pay the non-refunded fee? That would mean during the duration of your rental, you would have access to $91 and wouldn't need to wait days after returning the car to get $100 back.

Consider the same option is available for other services like hotel rentals, Airbnb, apartment security deposit, etc.

[smt88]

This is a terrible place to do market research on this. HN likely skews wealthy and financially literate, and this is a product for people who don't have a spare $200+ in their bank account or on their credit card. Basically it's the same people who would want payday loans.

Further, credit cards already allow people to get cash advances in an emergency.

Lastly,taking a $91 loan for an interest rate of 9% is financially insane.

I don't know if my repulsion at this (both morally and as a business idea) is apparent, but I am repulsed.

If you want to start a business, find a way to give people value rather than exploiting their desperation and/or poverty.

[dafounder]

You're missing the question. The idea would allow a customer to have better cash flow not take out a loan. What I am asking is would you pay a fee over placing a hold on your card. For a person with not a lot of money, holding $100 for 5 days can be a problem but paying $9 to not have that problem could be helpful.

[gus_massa]

>> Further, credit cards already allow people to get cash advances in an emergency.

Cash advance from credit cards is very expensive. The problem is that $9 for $91 during 5 days is even more expensive. (It's more than 60% in a month!) When you are charging more than the credit cards, it's too much.

The problem you have is that you must charge more because you don't have enough information and leverage to ensure the users will not commit fraud. Banks know the history of each user, how much the earn, have a good lawyer team, so they can charge less. You also have processing fee, and other overhead.

Edit: Deleted a few random meaningless chars at the end. My son typed them while I was not watching.

[smt88]

That's just insurance. You'd be insuring the amount of the deposit. Any business can buy this from a major insurance company if they want.

[dafounder]

They can't because it's not a current product offering.

[smt88]

Insurance is not a current product offering? I think you're trying to pitch a financial product without a deep enough understanding of finance as a concept and perhaps as an industry.

If, for example, Hertz wanted to stop requiring a $250 deposit on vehicles and instead take a $22 fee, they could approach any large insurance company and find out if they would underwrite it. That company's actuaries would assess the risk of a typical Hertz customer and either say that, yes, $22 is enough to cover losses, or no, it needs to be higher.

In fact, Hertz may already do this. A $250 deposit is incredibly low for someone renting a $20-40k vehicle with nothing more than a driver's license and credit card.

Source: I'm a partner in an insurance startup.

[enonevets]

I agree with smt88 regarding market research on HN is likely not a good place to do so.

Having said that, I definitely would not pay the fee. $100 is negligible of a hold and most rentals don't last for more than a week or two in my case (depending on where I am traveling). It wouldn't make sense to pay a fee when the hold is fully refundable and doesn't make a dent in my card usage.