Whenever I think of Lenders of Last Resort, I think of Gary Coleman and Montell Williams. I also think of the Payday Loan stores, conveniently located downtown and next to military bases. They are waiting for a weak moment in someone’s life to entice a new customer. [...]
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The advertising industry has done a fantastic job of convincing everyone that payments are the new currency. It’s now considered old-fashioned to save up for something before buying it. Instant gratification is becoming the norm for young people. Those who save up and pay with cash are a dying breed. This is the third post in a series of Money Fails. Money Fail: Broke on Thursday Payments Equal Profit
If you walk into a car dealership and get out your checkbook to pay for a car, they are probably going to be very disappointed. That’s because a big part of their profit from selling the car comes from the fianancing. In fact, the National Automobile Dealers Association (NADA) estimates financing and insurance contribute over 28 percent of the profit. That averages just under $1,000 per vehicle. But, it costs the owner thousands in interest, by the time the payments are finished. If you walk into a retail store, you will be solicited to sign up for their store credit card. It doesn’t matter whether you are in a posh department store or a big-box discount store. The sales people are trained to target customers, because the credit card increases the store’s profits. It increases their sales volume, interest income and average price per sale. Another little trick of the retailer is the zero interest loan. It sounds like a great deal for the customer, unless they are late on a payment and have to back-pay the 25% interest. Interest is a Big Expense
If most people invested just half of the money they paid in interest each month, it could easily make them into millionaires in their lifetime. Instead, it becomes a steady and reliable income for their banks. When I think of this arrangement, it kind of reminds me of the movie The Matrix. Instead of people being farmed for their energy, they are being farmed for their income. Yet, they are relatively unaware as they go about their daily lives. Continue reading Money Fail: The Payment Mentality This weekend, as I was saying “No” to a Walmart credit card for the hundredth time, I noticed a quota board behind the head cashier. It appears each cashier in the San Clemente store “Must Have 15 C/Cards Daily!”. [...] Wednesday, I figured out why Walmart is pushing so hard to sign shoppers up for their credit card. [...] Have you ever stopped to calculate how much you pay in interest every month? If you are like most American families, it’s probably at least a $1,000 per month and it could be a lot more. [...] |
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