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A student of mine is an employee of a local electronics chain store. He said the employees are trained and ordered to talk poor people into buying high-ticket items with store credit, because it works this way:
1) Customer buys $6000 TV with store credit.
2) Customer cannot possibly makes payments and falls behind.
3) Rates and fees spike upwards as customer falls behind.
4) Eventually, customer can't make payments and defaults on agreement (this is what the company has been shooting for all along).
5) Debt is turned over to collection agency, and store gets tax write-off for a defaulted account receivable.
6) Collection agency agrees to settle with hapless customer for a fraction of remaining debt.
7) Store still collects a percentage of whatever is collected, even though the debt was written off.
8) Store makes about $15000 on what was originally a $6000 TV.
The wife and I are a cash-purchase ONLY family. We own no credit cards at all, and will not pay for anything on credit except a house or car. If we can't buy something else outright, then we determine that we can't afford it and move on.
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Living is easy with eyes closed.
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