Someone, I don't know who, once said that there are three types of lies: "lies, damned lies and statistics". I think something similar can be said about credit agreements. Twice this last week we've been contacted by readers who have had problems with items they bought using credit agreements. Actually their complaints weren't to do with the agreements themselves but with other things like insurance, but I was left with copies of their agreements which I read.
One reader bought a DVD HiFi which had a basic cash price of P2,599.99. Incidentally do stores really think that when they price something at P2,599.99 we don't notice that they really mean P2,600? It's only 1 thebe less but do they really believe we're too dense not to see the attempted deception?
Anyway, back to the credit agreement. Remember that the cash price was P2,599.99. The customer opted to buy the item on credit over 12 months. On top of the basic price were 5 other items. "Handling charges" of P280, "Maintenance contract" at P429, "Customer Protection Insurance" at P800.77, "Contract fees" of P90 and "Finance charges" of P760.23. In total the various extras came to a whopping P2,360 on top of the basic price.
That's 91% of the basic price in extras. However in the agreement the store says that the finance charge of P760.23 is only 35%. However I can't make any of the amounts mentioned on the contract come to 35% of any other figure. I have no idea where they get that figure from. My concern is that this store is probably telling people that the interest they charge is only 35% when you can see that in fact you have to pay almost double the basic price if you want to pay on credit.
And what exactly are all these other items? What on earth is a handling charge? What are contract fees? A maintenance contract? I'll tell you what they are. They are an excuse. An excuse for hiking up the amount of your money they want to get off you. An excuse for lying about their real interest rate which is actually three times higher than they quote.
Then there's the Consumer Protection Insurance. These things are often sold as a protection for you. Protection against the item you buy being stolen, destroyed in a fire or being abducted by aliens.
That's all very sensible but in fact they are often nothing to do with protecting you, the consumer. They are there often there just to protect the store in case you stop paying your instalments. It's the store that's being protected, not the consumer.
The other credit agreement I saw was virtually the same but had some different extras. A general one called "insurance" and the most curious was P583.99 called "cartage". Could that mean delivery? That's another issue. A store once told us, in an unguarded moment, that the only reason they offer to deliver items is so they know where you live, so that when they want to repossess whatever you bought they know where to find it. So they charge you money to deliver things just so they can check up on you.
The big issue for me is the sense of deception you get from these agreements. All those ridiculous extras that mean nothing, it would be much simpler if they just lumped them all together and called them something like "Blatant rip-off fee". At least that would be honest.
OK, there's actually a bigger issue. Why bother with a credit scheme at all? Why not buy the item you want for cash instead? Yes, I KNOW the answer. You actually don't HAVE the cash.
Then why not save it. Instead of paying P389 per month for a whole year to buy the DVD HiFi why don't you put that amount in a savings account every month. By the time you've saved the price of the device you want three things will have happened.
Firstly you will have saved the basic price in only 6½ months, not a whole year. You won't need to save the money for all those extras, just the basic price.
Secondly 6½ months later technology will have moved on a little. We all see it with technology, every week they announce something new, something more advanced. What you can buy for P2,600 in 6 months time will be a whole lot better than what it gets you today.
Thirdly, because you put the money in a savings account your friendly bank will have paid you some interest. Maybe not a fortune but I did a quick calculation and I reckon it might come to the price of your first DVD.
All it takes is a little forethought, some patience and the ability to resist the temptation to spend the savings and you will have struck a blow for yourself and the rest of us in the fight against rubbish like cartage, handling and contract fees from companies that just want your money. Lots of it.
You CAN do it, you know you can!
This week's stars!
- Ditiro from Game at
- Kessy at Ola Milky Lane, also at Game City for being friendly, flexible and attentive.
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