From ATMs to Online Shopping: The Convenience Debt Spiral

The Cost Of Convenience

Thirty or so years ago the concept of instant gratification simply didn’t exist. Several key innovations occurred over the years, which, when interacting with each other, provided the means for people to incur previously unheard of levels of debt.

First Step

The first stage was set by the banks. Sensing a desire for convenience from their client’s, the banks had to expand access to their client’s accounts. Like any business, banks had operating hours, and were generally closed on the weekend. While this provided a safeguard to prevent people from spending money on impulse, it was very inconvenient.

The problem was solved with the introduction of the automated teller machine (ATM). The ATM made your money conveniently accessible whenever you wanted it. The idea was hugely popular, and ATM’s sprung up everywhere. ATM daily withdrawals are typically set at under $500 per day.

Debit Cards

The next advancement was the debit card. You needed this card to use an ATM, but the debit card represented much more. With a debit card you were essentially carrying the full balance of your bank account on your person.

Seeing a fantastic opportunity to increase sales, retailers embraced the technology by allowing debit card purchases in their stores. Typically the limits to debit card purchases are set at around a thousand dollars per day.

The creation of the ATM and debit card provided the customer with an unprecedented level of convenience and access to their money. More importantly, there were safeguards in place. The daily withdrawal limits helped curb compulsive spending behaviour, and your actual account was the ultimate safeguard.

Long before the days of overdraft protection, you couldn’t spend more money than existed in your bank account. The bank was willing to provide you with convenient access to the money in your bank account, but they had no intention of financing debt.

Safeguards Be Gone

The credit card destroyed these safeguards and opened the floodgates to debt accumulation. These cards became hugely popular when the card issuers realized the profit potential by charging excessive interest rates on unpaid balances. Individual retailers soon followed suit by issuing their own credit cards, useable only at their stores (retailer charge cards).

The competition between credit issuers fueled a campaign of promotions. Credit cards provided such “perks” as loyalty points, travel credits, hotel discounts, grocery store credits and so on.

Spend What You Don’t Have

While it wasn’t possible to create debt with an ATM or debit card, credit cards set a dangerous precedent for consumers. A credit card allows you to spend money you DON’T currently have.

Furthermore, since you could own multiple credit cards and retail charge cards, the level of debt you could attain rose to dizzying levels. Credit cards have limits set at thousands of dollars, which multiplied by an assortment of cards, can give a person a huge debt limit. As scary as it sounds, credit cards give the average person the ability to force themselves into bankruptcy.

The last safeguard in place was distance. The time and inconvenience of leaving your home and going to the purchase location helped reduce spending. The internet changed that situation forever.

I Want It Now!

How close are you right now to an internet connected device? Whether it’s a phone, IPad, tablet, or laptop, most people can be connected to the internet by simply reaching out their hand. The internet was the last piece of the puzzle and provided the ultimate in convenience.

Once again, retailers quickly seized an opportunity to increase sales by creating websites and applications to allow simple and convenient on-line purchasing of their merchandise. Delivery of the merchandise directly to your door was an added convenience.

Thus was born our current state of instant spending and gratification. All boundaries were removed; if you want it, you can have it, NOW.

If you want to do something about your debt, see our article 7 Tips for a Debt-Free Lifetime: Financial Freedom Guide.

Unfortunately, the removal of safeguards opened the door to destructive behaviours. Currently the only safeguard left in place to prevent excessive debt comes from within. Do you have a href=”https://manageyourmoney.ca/7-tips-for-a-debt-free-lifetime-financial-freedom-guide/”>the willpower and desire to overcome the instant gratification urge?

In my E-books (“Water Barrel” and “The Balance”) I discuss simple methods to live sensibly for today, take charge of your financial affairs, and invest safely for the long term. For more information please visit David Penna Amazon.

As always, I am not a qualified financial advisor. I just relate financial management to my own experience which may not resemble yours at all. Advice is frequently worth exactly what you paid for it. Most of mine came from expensive experiences.