It only gets worse!
When we get a credit card our ability to have what we “want” expands rapidly. We learn very quickly that we can have it today and pay for it later. This reminds me of the character from the Popeye cartoon who was always trying to borrow money to buy a hamburger with the promise to repay the loan on Tuesday. Advertisers bombard us with the message, “have it today, pay for it later” It is a very seductive message and very successful way to sell things. They know that if you can have it today and pay for it later you are more likely buy the item and actually spend more by buying a larger quantity or a better quality than if you were pay with cash. And this message is everywhere. With a credit card you can charge up to the maximum of your credit limit all at once or gradually work your way up to credit limit. Credit cards are the easiest way to take on debt because no one at the cash register is going to ask you, should you really spend this money?
Unless you have an American Express card, the credit card company does not want you to pay the full balance at the end of the month. They offer you a great deal, instead of paying the full balance you can pay the minimum monthly amount of 4% of the balance, plus interest. The minimum payment on a balance of $2,000 at 18% interest is only $80 the first month. And slightly less each month. BTW, assuming you do this, it will take you about 10 years to pay off the $2,000 credit card balance and you will have paid about $1,600 in interest on charges. And this is if you never charge another thing on that account!
When the cost of an item is very high retailers don’t even advertize the price. Instead they advertize what the payment will be. Next time you see an new car ad on tv, look to see if they even mention the price of the car? So your eyes are diverted from the cost to what the monthly payment will be.
What is happening is that we are being seduced into believing that we should have the things we want because we can afford the payment. People lose track of the fact that the payments accumulate allowing us to spend up to the last dime of our income. Trying to satisfy our thirst for the things we want by buying more things is like trying to quench your thirst by drinking salt water. It does not work and only makes you want more.