“People have got to learn; if they don’t have cookies in the cookie jar, they can’t eat cookies” Suze Orman

It can be tempting, particularly when money is tight, to take advantage of those buy now pay later deals. And catalogue companies have, for many years provided a facility for cash strapped people to spread out payments over a period of time should consumers want to buy clothes, furniture, electrical goods, toys or whatever it is they are selling.

One on line catalogue company, I was reviewing earlier this week said that their customers, who set up a credit facility with them, could stretch out the repayments back to them for as long as they wanted to.

They want on to say that there was even no need to repay the amount you owe them before you could purchase again, they simply add the cost on to the balance you owe them and further spread out the monthly cost. And if you don’t think the credit facility they gave you is enough, simply call them and they will see if they can increase it.

Aren’t they terrific and so accommodating?

I guess the only drawback is the interest rate they charge isn’t it…………………………………..39.9%

I have looked at the figures in the UK and a recent report carried out in March of this year has found the amounts owed on traditional forms of debt such as credit cards and personal loans is falling, as is the case in Ireland, however the amounts owed on high interest charging debt such as catalogue debt is actually increasing.

The debt charity who carried out the study found that this form of debt is a particular problem for women. I was amazed to read that this one charitable debt advice helpline received 53,332 calls in 2012 from people who had catalogue debt they could not repay. I then checked what the number was here in Ireland and discovered that the amount of calls the Money Advice & Budgeting Service (MABS) received here in 2012 from people who had catalogue debt was 603. It might not sound a lot compared to the figures in the UK, but the reality is that 2.3 people called MABS every working day last year looking for help and advice specifically about the amount of debt they have racked up on buying now pay later catalogue debt.  Of course these are just the numbers of people who called MABS, I suspect there are many others who haven’t called and are part of what I refer to as being part of the silent epidemic of people who are in so much debt, that it actually threatens to overwhelm them – we found this to be confirmed in a study we commissioned last month by Amarach Research where we discovered amongst many other things that 577 people do not go to work each day because they are suffering from financial stress – do some of them have catalogue debt? You can bet your life they do.

One other statistic that we found in our study, and it is absolutely relevant to catalogue debt, was that 32% of people we surveyed admitted that it was their lack of financial intelligence that has led to their high levels of debt. And this must be the case for people who use buy now pay later schemes because unless they have absolutely no other way of buying something i.e. they have no savings and can’t get credit from anyone else, why else would they willingly agree to taking out a loan that charges interest against their loan on a daily basis at an APR of 40%? And where you agree that the catalogue company can amend the terms of the agreement as they see fit?

When people get into difficulty with a particular debt, I often hear them say they didn’t realise what they were signing or it wasn’t explained to them properly, and you know they may have a reasonable argument in some cases but they have to take responsibility themselves. However, I do think some commercial operations like catalogue companies are very much aware of people’s lack of financial acumen and prey on their lack of knowledge by making credit available to them at terms that seem reasonable. Because, like large retail stores, who have their own store branded credit cards, they actually make more on the interest they charge on their credit facilities than they do on the item they have sold.

When you sign up to a credit agreement you are bound by the Credit Consumer Act 1995 and if you don’t adhere to the terms you willingly agreed to enter into, the company has the right to pursue you to repay your debt and charge you additional interest in the process. They can get a judgement against you which means they can use various methods to get the money they lent, back from you. They can for example get an instalment order against you, they could start bankruptcy proceedings, they, can even get an attachment order which means they can get money stopped from your wages to repay the debt. It amazes me that people sign up to credit agreements not knowing what could happen if they don’t repay and whilst no one sets out not to repay a loan, they should at least familiarise themselves with what could happen – so the moral of the story is to READ THE SMALL PRINT first before you ever decide to enter into a credit agreement. How many people actually read a loan agreement first, analyse it, question it, get advice and then a couple of days later sign it? Rather than just signing where the X is marked or highlighted on the form within a couple of minutes of receiving it? Unfortunately, very few I suspect.

Wouldn’t it be great if people saved first and bought later? The parents of my generation had to because they didn’t have access to credit, they saved each week and month and only when they had saved what the item cost did they buy it. And you know what is absent from our lives today, in my opinion, and it is something I have long said, is an appreciation that what you manage to save today is in fact what gives your family opportunity in the future and security today.

Let me finish by giving you a couple of tips before you think of buying on credit again:

• Do I really need this item?
• Am I buying it because I need it or because of what people will think of me for having it?

If you consider both questions before you make that next big purchase, and you are honest with your answer I assure you, your finances will improve dramatically. The basic idea here is to change the way you think about spending. This is not going to happen overnight, because the way we have been programmed to spend our money has been formed over a number of years and it will take time to alter our habits.