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by RC_ITR
1454 days ago
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But I’m telling you annualizing something like that is not convenience, it’s misleading. Does every cash purchase also have an infinite APR? Because there I’m paying $200 for nothing. If that’s not logical then where does it start being logical? |
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a) pay with a 2% reward credit card
b) pay with BNPL scheme with a 3 month term.
In the scenario a) you effectively paid $98 right away and in the scenario b) you pay $100 but after 90 days (let's say you don't have monthly payments for simplicity). For b) to be no more expensive than a) you need a way to make at least $2 from a $100 investment in 90 days. This means that whatever investment you make with the $100 has to yield 8% annually. Even though you withdraw money after 90 days.
If you have monthly payments you need even higher yield to compete with the 2% reward. E.g. if you pay $33.33 every month then you need to make 1% yield per month to collect $2 off your initial $100 in 3 months: you get 3 months of yield from the final $33.33 payment, 2 months of the previous payment and 1 month of the first payment for total 6 months yield from $33.33. That's 12% annualized yield.