It seems society’s viewpoint on the use of credit has changed from those of generations past. Back then people would obtain a line of credit or overdraft protection for emergency situations only. Credit was used for more big-ticket items like purchasing a home. When it came to buying products it was cash sales in the stores, and occasionally some merchants would accept checks from loyal customers. The world ran on currency, which meant price was king, not what the monthly payment would be. Here is why I believe using credit like additional income causes so many with financial devastation…
I need to mention that in these times salary and hourly wages doesn’t always meet the ability of survival. Credit becomes a catch 22 for those families because they can’t afford the basics. Using a credit card to buy groceries this week means they eat, however continually doing so with minimum payments and interest might not help down the road. The imbalance in the economy between pay and inflation has left the average family in a hundred-thousand dollars of debt. I think the idea of providing these working poor families with credit they can’t afford to payback, instead of jobs with proper wages, is simply the governments way of putting temporary brakes on anther depression. The marketing twist making people feel better about using their credit cards for groceries is air miles, points, and cash-back great justification saving face for the poor! There is another group of people I would like to mention when it comes to this topic of credit…
These are the folks who live totally out their means, having beer budgets with champagne tastes. These individuals who look like their rich, but in reality many of them have or are maxing out their credit. They’re the ones who have trouble even making payments, nothing in the bank just trying to get more credit. Stores love these types of buyers, marketing to them with gimmicks like no money down, don’t pay anything for 36 months, and zero interest. Maybe as an example they can only really afford a $500 television, with credit they can buy a $3000 one, and the payment would only be whatever. People are much more educated than before, so knowing in the case of bankruptcy they won’t lose that $3000 television, and leasing a fancy car is not an asset so the bank can’t touch that either.
The government needs and likes tax dollars from corporations, in order to keep them flowing providing credit to consumers to purchase keeps them coming in. The beauty for the businesses is either credit cards or financing is the modern cash business, they’re paid right away. As far as the finance companies who extend the consumer credit, they’ve already calculated the default percentage, charging the merchant interest accordingly. Providing credit also takes away success from small business, because they can’t compete, more of risk factor without as much volume, and many end-up paying the finance companies higher interest because less volume. A company like Ford will pay lower rates than an independent car dealer.
In conclusion I believe people are using credit as additional income because they’ve lost hope of the future. Most can’t afford to save-up money for what they want like the past generation, so the expression you only live once has become a way of life. Perhaps people can go back living within their means, only if they prioritize what is and isn’t essential in their lives. I’ve started doing this in my life a few years ago using small steps. As instances like not needing every cable channel saving $700/year, or buying a used car for cash, getting one way insurance, saving approximately in yearly payments $3500/year. Just those two things alone put $4200 extra in my pocket yearly. The point is I don’t feel we need to use credit as often if we stay within the bounds of our incomes!