This week I was eyeing out some rather pricey skin-care products. This is a range that I (and my skin!) absolutely loves, but it is out of my price range. Very occasionally, when I have some extra cash, I spoil myself with something small from their product range. They currently have a box promotion for a year’s supply of skin-care products and it works out at quite a discount. The problem is that it runs into thousands of rands. I don’t have that money sitting in my bank account.
I was sorely tempted because, after all, I was actually saving money in the long run, and if I break it down to the monthly cost it comes a little more into budget range (at a push) and, well, they also had other products that they added in, and, and, and … Needless to say we have all been there, finding ways to justify what is actually an extravagant expense for something we don’t really need and which we definitely can’t afford. And then the salesperson threw in her kicker: “Go on, just put it on your credit card and pay it off.”
The thing that saved me from the temptation is that I have a debit order that ensures that I pay off my credit card at the end of every month — I just haven’t given myself the option of “paying it off”.
Once I had walked away and allowed my rational brain to take over, I realised three things:
- I would have to pay it off over 12 months, which would add 20% to the cost of the purchase. The product is no longer such a bargain.
- The reason the product is selling at a discount is because the merchant, rather than waiting for you to come in every few months to buy your regular supply, has a guaranteed sale upfront for the year and they sit with the cash whilst we sit with the debt. If you hit a cash crunch during the year and decide not to buy your product one month, they lose a sale. But if they convince you to buy upfront on credit, it becomes your (and your bank’s) problem.
- While right now I may think I can afford to make those repayments, what if my car broke down or there was some other emergency? I would have used up my valuable emergency credit line and I may not be in a position to make my monthly payment, which would result in massive penalty fees and additional interest, not to mention the impact on my credit record.
These are all the reasons we should never take on short-term debt, and we know them but somehow these facts get drowned out by emotions.
So the best protection is just not to have the credit easily available. Get rid of store cards and either keep your credit card locked away only for emergencies or have a debit order so that it is paid off in full every month.