“BUY NOW—PAY LATER!” That idea constantly bombards people in many countries today. They are being persuaded that the thing to do is to buy an advertised product, then pay for it later over a period of time. This is called ‘buying on time,’ or credit buying.
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However, buying now and paying later really means going into debt. And more and more people are doing just that. As economist John Kenneth Galbraith stated: “People have changed their view of debt. Thus there has been an inexplicable but very real retreat from the Puritan canon that required an individual to save first and enjoy later.”
Commenting on this trend, an economist of the Institute of Motivational Research said: “In general, we have been shifting more and more from a puritanical culture to a hedonistic one . . . A credit card is a symbol of this hedonistic age. We are getting our pleasures, our purchases, our entertainment, before we‘ve actually earned them.”
In the United States so many people are now in debt that Hillel Black, in his book Buy Now, Pay Later, stated: “The result has been a consumer credit explosion that makes the population explosion seem small by comparison. . . . The total private debt is certainly greater than the combined private debt of man throughout history. Never have so many owed so much.”
How Paid For
How is all this debt paid for? It comes out of the future earnings of the individual, money he does not now have but expects to earn.
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This is where the problem arises. Growing numbers of people are now finding that they are unable to pay for all their credit purchases. As a spokesman for the American Collectors Association stated: “People are going out and using credit without really knowing what it’s all about. The average person doesn’t know the responsibility he assumes when he opens an account. It’s a shock to him at the end of the month to find he has been spending more money than he’s making.”
For some time, financial experts wondered what would happen with all that debt if the nation suffered any prolonged economic setback. What if workers did not earn as much, or lost their jobs altogether? they asked. The experts do not have to wonder any longer. Now they know, for the United States is experiencing an economic recession even as prices continue to rise.
As a result many workers have lost their jobs, or have had their wages reduced. This has caused more persons to come into economic trouble than at any time since the depression years. They are in debt, but now unable to pay. Hence, increasing numbers are going into bankruptcy, with the things they have purchased repossessed by creditors.
Even many who do have jobs are experiencing difficulty because of too much debt. An Atlanta banker said: “Most everybody is living beyond his means in the middle and lower-income levels. A typical family had been able to keep up until recently by being able to borrow more, but tight money stopped that and now many people can’t ‘borrow themselves out of debt.’”
The situation is just as Newsweek observed: “Indeed, the slump has already hit vast numbers of Americans one way or another.”
It Pays to Pay Cash
Not only has ‘easy credit’ induced many to buy things they cannot really afford, but by doing so they lose money. They have to pay more for the product because of interest charges.
It should be remembered that money lending is such a huge business because it is profitable for the lender. In fact, many companies do not want customers to pay cash, because of the huge profit they make on the interest on debt payments. Some make more profit on the interest than they would on the item itself if it were paid for in cash!
Nearly 25 cents out of each dollar in payment of debt now goes for interest charges. This means that people who depend upon credit are not getting their money’s worth. They are actually wasting much hard-earned money. If they had purchased items with cash they would have had more to spend.
An example of what can be saved when one is buying with cash is noted in Buy Now, Pay Later: “A store sells a refrigerator for $329.95. On a twenty-four-month contract with a $10 down payment, Mr. Consumer pays the store $66 extra for credit.” Think of how many quarts of milk that $66 could have purchased! How much meat could it have bought, how much clothing for the family? Buying that item on credit was like tearing up and throwing away $66.
No, credit is not cheap by any means. True-interest payments can vary from 12 percent to double or more the original cost.
The Wise Course
Economic difficulties will not go away in the future. They are far more likely to grow as this system of things moves toward its end. (2 Tim. 3:1) The wise course is to keep balanced in one’s view of material things.
Buy only what you can afford. Whenever possible, pay cash to avoid paying interest charges. If you want an item that you do not need now, begin saving for it. Put the money in the bank and collect interest. Then when you have the money you need, buy it with cash.
Whatever bills you incur, pay them promptly. At times companies give discounts for prompt payments, saving you money. If you must use credit, make sure it is only for something you cannot do without. Use credit very sparingly, and read the fine print in contracts to know exactly how much you are paying above the cash price.
Another practical suggestion: Since it has been proved that persons with credit cards usually buy more than when they pay cash, a good idea when shopping is to leave your credit cards at home!
Never let a seller overload you with debt by telling you about ‘easy credit.’ There is no such thing. All credit is hard. Ask anyone who is now unable to meet payments or who is having to declare bankruptcy. Yes, it is cheaper to pay cash. It is easier not only on the pocketbook, but on the nervous system too, for it can save much anguish
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