The Myth of “Easy” Payments

Advertisers make easy payments sound like a great deal. You get to buy the high-priced items you want or need right away without having to pay the full price. All you have to do is sign a contract that gives you the option to make smaller payments over a longer period of time. The problem with those long term contracts is that they require you to pay almost as much on interest as you would have paid for the item if you had bought it outright. Those payments are anything but “easy,” in fact, they’re downright hard on your bank account.

Years of Payments

Easy payment plans tie you into making payments for several years. Most of these plans can double or even triple the cost of the items because of the interest that accrues on your loan during the years that it takes to pay the loan off. Even if the payments fit comfortably into your monthly budget, you will have to keep paying for your items for several years before they will finally be paid off. What sounds like a good deal the day you bring your new items home may seem much less attractive during your second or third year of payments.

Actual Costs are Hidden

When you purchase something through an easy payment system, the real cost of the item is hidden. The sale price of the item is obvious, of course, but the amount of money you will eventually pay for the item depends entirely on the amount of interest you will have to pay on your loan. Longer loans have smaller payments, but they have higher interest. Your item could end up costing you two to three times as much as the sale price after you figure in all of the interest you will pay on the loan.

Easier to Purchase More Expensive Items

There is a real danger of getting into more debt than you can handle when you buy items on an easy payment plan. Since the monthly payments seem so small compared to the price of the item, you may find that you purchase something that is more expensive just because you can afford the monthly payment. It is very easy to upgrade your purchase to the most expensive option because the actual price of the item is not what you are thinking about anymore. The problem is that you are really spending more on the item than you would have. Spending more than you can afford on an item is dangerous for your budget, regardless of the payment plan.

Long Term Problems

Many people who buy items on easy payment plans find that they are making so many monthly payments that they do not have any income left over for savings. When an emergency happens, these people do not have any reserve funds to handle it. When you do not have the funds available for savings, you usually do not have any funds available to put toward your retirement, either. Easy payment plans can lure you into making purchases today that leave you buried in debt tomorrow.