Breder.org

Credit is selling your future

In Brazilian culture, it is the norm to buy consumer goods in installments -- the “buy now, pay later” arrangement --, using a credit card, or similar instrument.

This speaks to one thing: consumer goods are so expensive that most people lack the purchasing power to buy them outright.

Second, credit availability and marketing campaigns have successfully shaped consumer behavior into a cycle of: 1) my income, after expenses, isn't enough to purchase X; 2) a fraction of my future income for the next Y months is; therefore 3) I will purchase X with credit in installments -- which inevitably reduces the monthly available income for step (1).

That's great for business since credit cards have the license to print money by taking anywhere from 1% to 3% of all the transactions they intermediate.

Let me phrase it more bluntly: using credit, especially in the form of payment installments, is equivalent to selling your future income.

Indeed, that's an available tool, and it's a very good tool. It opens the door to tackle unforeseeable moments of necessity, build home equity, and maybe invest in your education.

But it shouldn't be the default go-to tool, especially for consumer goods.

A balance is very simple: you can afford it, or you can't afford it. Credit blurs the line in often unhelpful ways.