I have strong feelings about credit card use, but what do I think about buy now pay later? I noticed this option come up when I made purchases from an online retailer. The item was about $150 and the retailer allowed me to pay for it over time, without interest. Seems like a great deal, right?
Well in fact what appears to happen is that some people use this method to make purchases and even though they are not incurring interest – they are purchasing many more items than they normally would if they were paying for the items all at once.
My spouse showed me an Instagram post of comedienne Jimmy Carr speaking about making purchases at the mall. Just a note -I don’t recommend Jimmy Carr as a comedienne, even though I enjoy his work. I don’t recommend him because he is very offensive and may not be palatable for some. In any case, what he said in the Instagram post was (I’m paraphrasing) Stop buying things at the mall, in ten years you won’t even know why you bought that item. He said save your money instead and in five years you have something of value.
I did a quick internet search to understand what a typical American spends on incidentals each month, according to Forbes Advisor, Americans spend $288 on entertainment, $230 on cash contributions, (I’m not sure what that means, perhaps cash transactions versus a credit card transaction?), $162 on apparel and services, and $72 on personal care products and services. All together that is a whopping $752 each month.
If instead of spending $752 each month a person invested that amount each month, at the end of five years they would have $50,823 at 5% interest. Sometimes you have to buy clothes, be entertained, or get a haircut, but even with an occasional spend, you can understand that the investment offers good growth. If you bought at the rate of an average American you would be out $45,120.
Take a moment to reflect upon your last credit card purchase. I know what I bought the last time I used my credit card, I got an oil change, and I registered my car. I will pay off the total amount well before interest is charged. I still use credit cards all the time, I never pay interest though. I always pay them off right away. The last time I paid interest was way back in 2011 when I was finalizing the payments for a student loan.
I will never stop writing about this. This other day I was hanging out with my adult daughter. She is pushing 40 and is a wonderful person. However, my children are not on my no credit card or debt bandwagon. Sadly the people you hope to influence the most are the people you love, and I’ve made no little headway, but…we were driving in my car after seeing a film. We had a fantastic time and having her in my car to chat with was an absolute joy. I was telling her I had to head home right away so I could get my oil changed, and she noticed I had only 88,000 miles on my car. She asked how much I paid for my car and I told her $10,000. She said, “Wow that is smart to have a good car with low mileage that is paid off.”
I told her my car should last until at least 250,000 miles and at the rate I put mile on my car I’ll be about 127 before it starts to have issues. We laughed, but in my heart, hearing her say that I was smart to buy an affordable used car that would last me the rest of my life made me feel great. I felt as though finally after all these years my daughter is seeing that there is a good way to live a nice life without carrying a lot of debt.
I don’t spend anywhere near $288 each month on entertainment. The most expensive entertainment gift my spouse and I give each other every year is season tickets to the Broadway plays that come to our area. It ends up being about $50 per person, per month and is well worth the cost. If I were to buy individual tickets to see Hamilton, for example, the tickets would be very expensive, several hundred dollars. Hamilton was included in our tickets last year along with many other fantastic shows. It is a lavish expense for us, as we typically read for entertainment, do crafts, or stream entertainment via our Roku app on our television. I admit I pay for Amazon Prime, mainly for the fast package delivery, but also for the films. My spouse subscribes to HBO and Hulu with commercials. We use the commercial time to get water or use the bathroom, just like in the “olden days”.
My point is that you don’t have to spend $700+ each month to have a lovely life, and you should not pay over time. I can assure you that paying over time is a convenience the online retailers are offering interest-free for now. I predict that once people have become accustomed to the pay-over-time option, they will begin adding on interest. It reminds me of how we used to sign up for apps on the internet for free and the exchange was that the app developer would get all our data. That is the payment. Of course, we don’t understand the value of our data, just like the first people didn’t understand that the land was worth more than beads and sea shells. Now of course the apps are all paid apps, not only do you pay with you data, you also now pay with your money as well.
Be careful out there. Take your money seriously. Yes, you may always be able to earn more, but you’ll never earn as much as the interest rate on your credit card. No investment you have will earn 23%. It’s not a good investment to pay overtime. If you can’t afford to pay for it now, just don’t buy it!
