Episode Transcript
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Speaker 1 (00:00):
Let's say good morning now to the host of How
to Money on KFI. It's Joel Larsgard. So, Joel, we've
talked about buy now, Pay later, and you've been hesitant
to support that. I'll say that, but apparently there's another
reason that you you really might want to think before
you use the BNPL.
Speaker 2 (00:22):
Yeah. So, I know some people don't think by now
pay later is a big deal, and that it's similar
to pay with a credit card. You're paying installments and hey,
guess what, there's less of a chance of getting hit
with fees or high interest rates. But what concerns me,
I think in so many ways about buy now, Pay Later,
(00:42):
is the fact that it's not really been brought into
the light as far as credit scores. That's at least
one of my concerns. And so there was talk over
the prior year that hey, pretty soon the buy now,
Pay Later companies are going to play nice with the
credit buros. They're going to start reporting the transactions of
consumers to Equifax and TransUnion and Experience, and so you know,
(01:04):
once once those the transactions are brought into the light
of day, influencing credit scores, then lenders are going to
have a little more a little better idea about what's
happening behind the scenes that right now is kind of
shrouded in secrecy. And so it looked like that was
gonna happen. It was going to be factored into FICO scores. Fiico,
which is essentially the biggest uh the main aggregator of
(01:25):
credit scores, said hey, we're going to actually create a
new credit score that factors in buy now, pay later transactions.
But the buy now, pay later companies are getting cold
feet and they're saying, actually, we don't want the credit
bureaus to have this information. And I think what so
much of it comes down to is the fact that
it's ultimately going to harm consumer credit scores and they
(01:47):
don't want their customers to get to get dimmed because
of or behavior.
Speaker 1 (01:52):
Okay, it's kind of an interesting thought, because you if
they don't want to be part of the credit scoring
first or whatever you want to call it, but then
how are they going to get their money? They must
have figured that into the business model that some people
aren't going to play.
Speaker 2 (02:08):
They have, they have, I mean, I think their business
model is still kind of they're figuring it out as
they go, but you know, many of these buy now,
pay later companies, part of the way they make money
is telling the retailers, hey, if you allow consumers to
pay via Klarna or after pay on your website, you're
(02:30):
gonna you're gonna some more product, and so give us
a little cut of the transaction and it's going to
be a win win, except for the loser in that situation,
as consumers who behaviorally are using buy now, pay later
in a way that does cause them to spend more
than they thought they would, and we're seeing kind of
the hangover from that effect, like credit card debt hasn't
(02:51):
gone down as buy now, pay later debt has gone up. Uh,
and people are just literally spending more of their hard
earned money on stuff because by now, pay later makes
it easier and frictionless. And that's why I am a
big fan. That's so many turns in the process of
personal finance, of creating more friction in the process, like
when there is more friction involved in your transactions, involved
(03:14):
in some aspects of your person. There are some things
I want you to make easy, right, the smart things,
the automatic investing, the increasing your contribution to your four
oh one K make that easy but then make the
other stuff, the spending stuff, a little bit harder. In
that way, you're going to kind of grease the wheels
to do the right thing in your financial life.
Speaker 1 (03:33):
Yeah. I think we've all been guilty of impulse spending because,
like you just said, it's so easy to do. Okay,
So when we're talking about a bigger investment and we're
talking about homes, and home prices are going up, and
we know that we pay real estate agents a certain fee,
and as home prices go up, boy, those fees sure
go up too. But there may be a solution for that.
Speaker 2 (03:54):
Yeah. Yeah, So it's interesting. This is kind of still
in the aftermath of this court ruling against the National
Association of Realtors, which basically said, hey, guess what, there's
realtors are not just charging too high a fees, but
there's kind of this collusion in a sense to get
people to pay more than they need to. And it
(04:15):
was just the standard three percent to a buyer's agent,
three percent to a seller's agent, and that is far
more than what people pay in many other nations around
the world to realtors for representing them in the either
purchase or sale of a home. And so we're starting
to see finally in the aftermath of that ruling saying, hey,
(04:36):
guess what, you can't just knee jerk charge this amount.
You have to give buyers and sellers a say in
what they pay to realtors. We're starting to see individuals
negotiate more. Got an email from a listener last week saying, Hey,
guess what heard you talking about Jada. I'm paying less
to my agent because I asked them up front, Hey, WI,
will you represent me for less money for a smaller
percentage fee And they were like, yeah, sure, And I
(04:59):
think we have more say so than we think. But
it's also interesting to see more technology, more services come online.
Redfinn has been doing this for a while with a
discounted rate for its agents. Well, there are new services
like Turbo home is one which is in California and
Texas only. But these things are these services are expanding
(05:20):
rapidly and they're giving individuals another option, maybe a more
low frills, less handholding sort of ability in the transaction,
so that you can say, hey, what do I prioritize.
Do I want a full priced real estate agent who's
going to give me white glove service or do I
want a tech service that's going to charge me a
fraction of the price, sometimes a third of what an
agent might charge get the thing done, but I might
(05:43):
have to do a little more work on my end
to make it happen.
Speaker 1 (05:45):
Okay, So shop around and you can save money buying
and selling. And for more great financial advice, you can
listen to Joel Larsgard every Sunday from noon to two.
It's called how to Money on KFI. You can also
follow Joel at how to my Joel. Thank you, Joel.
Speaker 2 (06:01):
Thanks Amy