You can hardly blink these days without someone offering you a car, a mattress, or a guitar or keyboard (if you’re a musician like me) for a sweet deal… on credit:
- “No Money Down!”
- “20,000 Free Bonus Miles When You Sign Up!”
- “0 APR for 60 months!” (I did a double take when I first started seeing these ones)
In our easy money environment, isn’t it just so tempting sometimes to grab for some of this “free” money? We have been raised on credit card commercials, and such offers that make it seem natural to buy things on credit. Never mind that most people do not understand what terms like “APR” mean (It was only a few years ago that I, someone who graduated from college with honors, figured out what “18.96% APR” meant, for example. Translation: it means you will be paying up the wazoo in interest if you don’t pay down your balance ASAP). Besides, our credit cards look an awful lot like our debit cards, don’t they? I mean, credit is basically like money in the bank. Isn’t it?
No, actually, it’s not, as anybody who has ever bought anything on credit (and that’s nearly everyone) should know. It’s funny how much of a price we pay for all this “free” money (hint: usually a lot more than its original value). Credit card companies are experts on human psychology, and they understand the tendency of people to be short-sighted and even impulsive with their purchases. This plays well with their business model. They dangle the illusion of something for nothing in front of people like free brownies. After all, who wouldn’t want to take some stranger’s money, even if they charge you so much interest that you end up paying 150% or even 200% or more of the original amount for the privilege of doing so?
I admit it, I have skepticism about the credit card industry (or couldn’t you guess?). Yet for the record, I have used debt myself at times for “good” reasons. And I do believe Robert Kiyosaki when he says that being in debt… <gulp>… can be good. I think this can especially be true in business and real estate. I also see that many people take advantage of credit card points and offers such as free miles and hotel rooms and gas discounts to much success. And there’s no doubt, taking out student loans helps many people finance their higher educations.
It’s all about how you use the credit, and how you manage your money so that over the long-term you come out ahead. All too often, it seems debt leaves an onerous weight on people. I personally have only had modest amounts of debt (under $15,000 for my student loans for example… small compared to some people’s college debt). This is because I always felt an extremely uncomfortable with the idea of debt. I never liked the implications it had of messing with my feeling of control over my life. I still remember the first time I signed for a college loan. It was probably only a couple thousand dollars, and yet, to me it felt as if someone was putting a chain around my waist and declaring me their prisoner.
I am not alone on this feeling. In fact, there is a term for this: debt peonage, or becoming someone’s slave from debt. As anthropologist David Graeber explains in his book “Debt: The First 5000 Years,” in distant times debt could lead people to actually becomes slaves, as they were often forced to do manual labor for years or even despicable acts like sell off their wives or children to pay off debts. Although we have hopefully moved on from such primitive circumstances, I believe this sense of personal degradation (or even slavery) still exists in the hearts and minds of millions of people. After all, how many people spend years, sometimes decades, of their lives working to pay off their debts (like student loans or mortgages, for example)? If this is not slavery of a type, toiling your life away for someone else, I’m not sure what is.
To be fair, debt can be used well, as with any tool. After all, it can help enable great blessings in our life, such as buying a home or graduating from college. Yet in today’s age, we are all too often encouraged to get into debt by companies who stand to benefit from our ignorance. They may smile in their glossy commercials and dangle free swag in front of us, yet it’s funny how all that “free” stuff comes at such a high price.
I’ll end with this: when you borrow money from someone, you probably benefit in the short-term. But who benefits in the long-term? And do they have your best interests at heart?