The reasons we as Americans buy on credit varies, but without it most of us would
probably never be able to purchase necessities such as a home or automobile. The nation's
economy depends on credit, the promise to pay later for goods and services used today;
but along with consumer credit comes consumer debt. With the rise in telemarketing and
commercializing in America it is no wonder why Americans feel the impulse to buy now,
pay later. The most common form of consumer debt is installment debt, which is when a
consumer borrows the money to purchase an item and agrees to repay the loan in equal
installments over a fixed period of time.
Without installment debt most consumers could not afford to purchase items such
as a home. The truth of the matter is that we, as Americans, tend to want to purchase
more than we can afford to purchase when we want it. But, we can afford to pay it out,
over time, in fixed payments.
Mortgages, a debt owed on real property, are the latest form of installment debt.
Other forms include automobile loans and credit card purchases. Just pick up the
newspaper any time after Christmas and you will find articles on managing your mounting
debt from Christmas.
Not realizing the extent of the consumers' debt is one of the most common types of
credit problems. Denial may play a partial role in this problem, but the lack of education
seems to be the largest reason for consumer debt. Credit card use is up 20% and a large
number of Americans do not know the percentage rate at which the credit card companies
charge. Many credit card companies have started "personalizing" interest rates by not
disclosing the interest rate until after the consumer has received the card. By not
disclosing the interest rate on the application the credit card companies prohibit the
consumer from shopping around for the best deal.
You could just say they should cancel the credit card, but did you know several
requests for consumer credit could be viewed negatively because the information is
reported to the credit bureaus? This leaves you, the consumer, with a bad credit report.
Household debt and bankruptcy are at record levels and appear to be on the rise. Until we
as consumers begin to educate ourselves and stop living beyond our means, we only have
ourselves to blame.
In conclusion, although consumers are not forced to buy, most feel compelled to
purchase goods and services because they need them and do not want to wait. Rather than
saving they go into debt, the most common of which is installment debt.
1. Miller, R. L., Economics: Today and Tomorrow, Hesterville, Ohio; Glencoe-McGraw
2. "Major Growing Pains" U.S. News and World Report (Oct. 21, 1996) Pg. 62-64
3. "What's the Rate? They Won't Say." U.S. News and World Report (Aug. 19, 1996) pg.
4. Lee, Susan Susan Lee's ABZ's of Economics New York; Poseidon Press, 1987