Debt: Good or Bad?

The following story caught my eye this week:

Target Will Issue Its Own Credit Cards; Drops Visa

Target will stop issuing Visa Target cards next week and instead will offer cards that can be used only in its own stores, Stacey Vanek-Smith reports. The company says that customers who use store-brand credit cards spend more money than customers who have Visas they can use anywhere. A pitch that offers 15% in savings to people who sign up for the card helps to seal the deal.

“It’s part of a bigger strategy,” Nick Bourke, who runs the Safe Credit Cards Project for the Pew Health Group, tells Vanek-Smith. “It’s really about driving people to come into your store more often and to spend more money at your store.”

Store cards are also filling a void created when card issuers began to get tougher on credit lines. And, points out Ben Woolsey of CreditCards.com, store cards skirt some of the new credit card regulations, allowing customers who have trouble getting a Visa card to still buy on credit.

My generation has seen a drastic change in the way we think about debt.  As far as government debt, we just don’t relate to such big numbers.  They are beyond our comprehension.  And so the public is not likely to pay attention to the consequences, no matter how much the conservatives talk about it.

But something that I noticed about 8 years ago when I was buying a car, the dealership automatically assumed that I wanted to go in debt to pay for a set of wheels.  They didn’t ask how much I wanted to spend, they asked what I wanted for a monthly payment.

I didn’t want a monthly payment.  I was going to pay cash. $7,000.  A few years later the same thing happened at another dealership.

We, as individuals have gotten ourselves into debt by thinking about paying for what we want later, over time, with interest instead of what my parents taught me to do.

My parents said the same thing, pay over time, but without paying interest.  Instead, earn interest.  This is called saving for what you want, and then paying for it in full.  Like I did with my first car and also with the last few cars.  There were a few cars in between that I made payments on, and while it seemed okay because “everyone did it that way”, it feels much better knowing that I don’t have car payments.

The church I attend is in debt.  They call it a line of credit, but the problem is they have larger annual obligations than they have income.  They are not alone, many, many organizations are running into this as well as individuals.  It’s a mindset.

The story I shared with you about Target is perhaps a sign of things to come as businesses adapt to consumers acceptance of being in debt and paying overtime, and now Target instead of Visa will collect the interest payments.

I haven’t seen the marketing campaign for this yet, but I’m sure they’ll dress up this pig to look like a delicious steak.

And we will continue to turn a blind eye to the consequences of indebtedness, both on a personal level and by our federal government.

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