Investopedia defines Consumer Credit as follows:
Consumer credit is basically the amount of credit used by consumers to purchase non-investment goods or services that are consumed and whose value depreciates quickly. This includes automobiles, recreational vehicles (RVs), education, boat and trailer loans but excludes debts taken out to purchase real estate or margin on investment accounts. For example, a mortgage for purchasing a house is not consumer credit. However, the 52 inch television you put on your credit card is.
This is a nice and comprehensive definition…..
Consumer credit is a big tool in the hands of the seller to cater to your Instant Gratification genes! Why wait for tomorrow if you can do it now – remember the last time you used your Cons Credit to buy a thing you do not need?
Well, before the morals, the facts.
1. Consumer credit is expensive and real: there are many schemes that are announced to sound like it is free. Well to reiterate, there are NO free lunches. When a dealer or a distributor gets say a 20% commission on a product, he needs to sell more to earn more, right? So he gets along with a finance company (or sometimes uses his own money) to encourage people to buy more. So he shares his commission (with the financier) AND CHARGES you interest by increasing the price.
TO CALL THE BLUFF WALK AWAY AFTER TAKING THE DETAILS. Then OFFER to buy it for full cash down payment, and ask for a discount.
THAT DISCOUNT THAT YOU DID NOT GET IS THE COST OF CONSUMER CREDIT.
2. CC is addicting: if you use Consumer credit once – right from groceries to clothing – it takes a very long time to realize that YOU are living beyond YOUR means.
3. Postponing a purchase or waiting to buy adds to your strength. The power to say NO to your Instant gratification cells in your body, and is good for your health.
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