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Affirm Review: Why You Should Stay Away

Have you done any online shopping recently? Chances are you’ve seen an option on the checkout page to split up your total into four (or more) easy payments instead of paying it all at once. Most of those buy now, pay later options come from digital installment companies, and Affirm is one of the biggest.

If you’ve seen the option to use Affirm instead of paying for a big purchase out the door, you may be wondering if it’s a good idea. It’s not—but let’s talk about it.

You should never use Affirm because it’s nothing more than a digital loan with high interest rates. Affirm’s whole purpose is to make it possible for you to buy stuff you can’t afford to pay for with cash.

I hate to be the bearer of bad news, but if you can’t afford to buy something with cash, that means you can’t afford it at all. And as we’ll see later on, there’s a much better way to pay for big purchases than by using Affirm.

What Is Affirm?

Just like Afterpay and Klarna, Affirm is a loan provider company in the world of digital installment plans. Yep, they’re in the debt business. They say they’re customer-focused, granting people the opportunity to “say yes.” But the only thing they’re setting you up for is saying yes to debt. Yeah, no thanks.

Affirm does say that their payment plan option isn’t “unhealthy debt,” but that doesn’t mean anything. After all, you can use Affirm to buy designer baby clothes or an inflatable jacuzzi, and I just don’t think there’s anyone who’d call that good debt.

Also, Affirm talks a big game about helping you, but it’s a publicly traded company. That means Affirm has stockholders who are very interested in making lots of money, and the main way they do that is off of your interest payments.

Affirm Makes It Easy . . . to Go Into Debt

Let’s talk a little about how Affirm works.

First you have to download the app or go to Affirm’s website and create an account. Account holders have to be at least 18 and be a permanent resident or citizen of the U.S. Then you hand over your personal info—like your cell number, email address and the last four digits of your Social Security number. And you have to agree to receive texts from Affirm.

Affirm works with thousands of sites and stores, including Amazon (when you spend at least $50). As you’re checking out, you just select Affirm as your payment method.

Then you pick if you want to pay for the item for one, three, six or 12 months. Once you select the financing option and click to purchase the item, Affirm pays the seller, and you’re on the hook to pay Affirm back for the amount of your purchase—plus interest (unless you choose the one-month option, which is technically interest-free). And don’t forget: Affirm is banking on you paying as much interest as possible so they make more money.  

When it’s time to make a payment, you can use the Affirm app or visit the site. Or you can select autopay and Affirm will withdraw the money straight from your account. Once the payment schedule you’ve selected is complete, you’re done with that loan.

Side note: Affirm checks your credit to make sure you’re eligible for the loan. The check itself won’t affect your credit score, but late payments can. I’ll cover that more in a moment.

Why You Should Stay Away From Affirm

Let’s go over a few reasons why digital installment plans are a bad idea. To start, interest rates can be high. Like, really high. To give you some perspective, the average credit card interest rate is at 22.77% right now, while Affirm’s rates can get up to 36%.1,2 That’s almost twice as much, you guys!

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And the longer you take to pay off that loan, the more you’ll pay in interest. Speaking of interest, if you return an item, you won’t be refunded the interest you paid Affirm.

Another reason to stay away from Affirm is because missed payments can be expensive. Like I said earlier, it’s true that Affirm won’t charge you late fees. But customer reviews on Better Business Bureau say the late payment still damages your credit score—which can be even worse than a fee.

Even though I personally live without a credit score and encourage others to do the same, I’m not a fan of companies being sneaky about how their processes work. Also, customers say getting a refund from Affirm after they return an item is often a nightmare.

Here’s the bottom line: Affirm is in the debt business, and debt feeds on instant gratification—buying what you want right now without having to wait. Listen, I want you to be able to buy and have nice things, but I want you to do it without going into debt!

Luckily, there’s a great way to make that happen.

Is There an Alternative to Affirm?

Yes! Instead of using an installment payment plan with Affirm (or anyone else for that matter), you can create a sinking fund. What’s a sinking fund? It’s an intentional way to save up for a future expense by setting aside a little bit of money each month.

Here’s how it works: Let’s say in four months you want to buy a new tablet that costs $400. In your monthly budget, you’d add a line item—maybe you label it Tablet Sinking Fund of $100. If you stick to your budget and set aside $100, in four months you’ll have enough money saved to buy the tablet. No debt (or interest) necessary!

The best place to make a sinking fund is in the EveryDollar app. (That’s where I make mine!) It’s a free budgeting app with a feature that lets you create sinking funds and track your progress toward your savings goals.

Just because you have the option to go into debt with Affirm doesn’t mean it’s a good option. All that will do is get you stuck in a cycle of debt. Don’t give into the pressure to use debt. Start your free EveryDollar budget today.

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Rachel Cruze

About the author

Rachel Cruze

Rachel Cruze is a #1 New York Times bestselling author, financial expert, and host of The Rachel Cruze Show. Rachel writes and speaks on personal finances, budgeting, investing and money trends. As a co-host of The Ramsey Show, America’s second-largest talk radio show, Rachel reaches millions of weekly listeners with her personal finance advice. She has appeared on Good Morning America and Fox News and has been featured in publications such as Time, Real Simple and Women’s Health magazines. Through her shows, books, syndicated columns and speaking events, Rachel shares fun, practical ways to take control of your money and create a life you love. Learn More.

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