Tricky Store Pricing and The Truth of the Matter
At FamilyMeans, we practice what we preach when it comes to financial education. Our staff are able to communicate financial pitfalls and tips people should look out for in their everyday lives to help them balance their budget, because they follow the same advice. One of our staff members, Eli Snyder, shared a story about how watching the pricing of items at a store can be tricky, and what the truth of it all is ...
"The other day I was meandering my way through a local big-box home improvement store, getting ready for the never-ending weekend projects that crop up once you are a homeowner, and couldn’t help but notice some questionable pricing tactics shown on the signs in front of me. Instead of the signs revealing how much the brand new sparkling red snow blower or the shiny stainless steel propane grill would actually cost, should one want to take it home with them that day, it simply listed the minimum monthly payment increase that would be added to your store credit card! After further inquiry I noticed this was not an isolated event. Dozens upon dozens of bigger ticket items found throughout the store that day were advertised in that very same way. I was floored by this to say the least!
"Now it’s obvious why the big-box stores would employ this strategy to sell their products. They figure if they can advertise a specific brand grill/snow-blower that you absolutely need would only add $16 per month to your monthly credit card payment, then they’ve completely avoided the sticker shock consumers used to experience when considering whether to spend $400 for that new toy. More people choosing to give-in to their immediate impulses mean more money in the store’s pockets.
"Why the outrage you may ask? After all it’s only a mere $16 or so dollars per month to get what you want today, right? Wrong! Let’s assume you fall prey to this type of advertising and make this purchase on your store card. And lets also assume you have the national average interest rate of 15% APR on your credit card, and that you simply pay the minimum monthly payment on this debt until it’s paid off. The cold hard truth of the matter is it would take you over three and a half years to pay this off. It would also not only cost you the $400 for the product, but it would cost you an additional $120 in interest charges! And who knows, in three and a half years you may very well be in the market again for some of these same big ticket items causing this tempting cycle to potentially start over. All because we let them convince us that we 'HAD TO HAVE IT NOW' and we couldn’t resist our better judgment.
"Now I’m not anti-grill/anti snow-blower/or anti big-ticket item by any means, but let’s not kid ourselves into believing the cost of 'having it now' is low. Let us instead embrace the idea of spending some of 'today’s money today' instead of the ever so prevalent 'spending tomorrow’s money today' mantra we find throughout our culture today."
Want to learn more about how to best balance your budget? Contact FamilyMeans' Financial Solutions services today to get started.