For Sale: Debt

Sale StickerBut now it seems as if almost everyone is in the debt-selling business. Everywhere you look someone is offering a branded credit card with a cute picture most often from the big two in debt selling, MasterCard and Visa. It is a booming business. And it is a business that makes money twice on every purchase. First it takes a cut from the sale, so the merchant takes a hit. Then it makes money by selling you debt, tempting you with ridiculous minimum payments (albeit coupled with double-digit annual interest).

Just think, how come consumer credit rates didn’t go down when regular interest rates (i.e., the debt-sellers’ costs) dropped? The answer of course is: why should they? It is a seller’s market. So a few companies will offer you rates in the low teens -- big deal! We have been in single-digit interest rates for most other consumer offerings for a while. Mortgage rates, which are now inching back up, were at an all-time low, yet credit card rates barely moved at all.

The credit card business is too hot; you can make way too much money catering to instant gratification. Which brings us to another facet of our western money psychology, the belief that tomorrow may never come. We will always pay off our debts -- tomorrow, next month, when the tax refund comes in, when we get a raise, when the lotto hits, anytime that’s sufficiently far off into the future.

How else do you explain the increasing reliance on credit for “everyday” purchases? We “know” logically that we shouldn’t buy that movie ticket with a credit card, but our shadow steps in and insists that it’s “worth” it, nonetheless. Not because we “needed” to see a movie when we were short of cash, but because we “needed” to avoid facing some issue that our desire to see a movie we couldn’t afford would have brought up.

And, once you’re in debt, the monthly payments, even minimum monthly payments, can make it impossible to pay cash for things that are essentials, for those things like food and medicine that we really do need right now.

I kid you not; but you can now use a credit card to purchase bus fare. What madness is this?