but without it most of us wouldprobably never be able to purchase necessities such as a home or automobile. The nation’seconomy 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 andcommercializing 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 aconsumer borrows the money to purchase an item and agrees to repay the loan in equalinstallments over a fixed period of time.Without installment debt most consumers could not afford to purchase items suchas a home.
The truth of the matter is that we, as Americans, tend to want to purchasemore 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 thenewspaper any time after Christmas and you will find articles on managing your mountingdebt from Christmas.Not realizing the extent of the consumers’ debt is one of the most common types ofcredit problems.
Denial may play a partial role in this problem, but the lack of educationseems to be the largest reason for consumer debt. Credit card use is up 20% and a largenumber of Americans do not know the percentage rate at which the credit card companiescharge. Many credit card companies have started “personalizing” interest rates by notdisclosing the interest rate until after the consumer has received the card. By notdisclosing the interest rate on the application the credit card companies prohibit theconsumer from shopping around for the best deal. You could just say they should cancel the credit card, but did you know severalrequests for consumer credit could be viewed negatively because the information isreported 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 weas consumers begin to educate ourselves and stop living beyond our means, we only haveourselves to blame.In conclusion, although consumers are not forced to buy, most feel compelled topurchase goods and services because they need them and do not want to wait. Rather thansaving they go into debt, the most common of which is installment debt.Bibliography1. Miller, R. L., Economics: Today and Tomorrow, Hesterville, Ohio; Glencoe-McGrawHill, 19952.
“Major Growing Pains” U.S. News and World Report (Oct. 21, 1996) Pg. 62-643. “What’s the Rate? They Won’t Say.” U.S.
News and World Report (Aug. 19, 1996) pg.614. Lee, Susan Susan Lee’s ABZ’s of Economics New York; Poseidon Press, 1987————————————————————–