A recently launched voluntary benefit addresses employees’ financial stress with a program that blends financial education and budgeting resources with an interest-free credit option that imposes no cost or liability on companies offering the program.
“If employers sign up with us, the first free component of our program is that employees have access to an online assessment and basic training, budgeting and savings information to help them get their economic house in order,” says Michael Thiemann, CEO and co-founder of Zebit. “In addition, employees can purchase items online from the Zebit marketplace and pay off the purchase price over six months at a zero rate of interest.”
Typically, employees are not required to complete the education modules before they are permitted to register for the credit component of Zebit’s program, but Thiemann says in rare cases where employers opt for this pre-requisite, they can accommodate them.
Zebit is paid the difference between the wholesale and price of goods purchased by employees registered on their platform. “We have built a technology module that goes out and scans 45 Internet sites for pricing information. Right now we charge the average price. We will never be the lowest, but we will never be the highest,” he says.
There are over 12,000 name brand products available on the Zebit marketplace in 15 categories. “We offer everything from furniture, to baby goods to consumer electronics. Basically, we have everything you could find online from any other eCommerce aggregator like Amazon, Walmart or Target,” he says.
A study released early this year by Bankrate.com reveals that over 60% of Americans have no emergency savings to replace a broken refrigerator or new tires for their car that may cost as little as $500. Faced with an emergency, they say they would raise the money by reducing spending elsewhere (23%), borrowing from family and/or friends (15%) or using credit cards to bridge the gap (15%).
“People living from paycheck to pay check will frequently resort to very bad options in an emergency such as rent- or lease-to-own arrangements that can cost four times the original value by the end of the contract, payday loans or high interest credit cards,” Thiemann notes.
The program has several built in features to try and make it a responsible credit option, Thiemann says. “For example, credit extended to employees can’t ever be more than five percent of gross pay. And they can’t get a return of the credit amount until they fully pay off what they bought.”
“Therefore, an employee earning $50,000/year has a $2,500 debit line,” he explains. “If an employee bought a $1,200 refrigerator, he would have $1,300 left to buy other necessary items. But he wouldn't get access to the $1,200 again until the refrigerator is completely paid off after six months.”
There is also no integration with any employer systems. Each employee has a unique number so they can be matched to the employer and salary information can be confirmed, but the registration process is done one-on-one with Zebit.
While Thiemann acknowledges that if the six months of post-dated payments have been charged to an employee’s credit card, Zebit has no way of knowing if the individual will actually pay off the amounts each month or if it will become part of high interest revolving credit card debt. Nevertheless, he says that employees will never owe interest to Zebit for the six months of credit.
If an employee leaves the company, in most cases Zebit will still get paid because the agreed upon post-dated debit or credit installments will continue to be processed by the individual’s financial institution. If an employee who was paying via a pay card loses his job, he will still owe the balance but regardless of how long it takes for him to retire the loan, no interest will accrue.
“The most valuable part of our program is that unlike virtually every other credit option typically available, our clients’ employees can be confident that they are never going to be paying more than the checkout price,” Thiemann says.
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