It’s not the bad guys like Wonga who won, it’s the good guys who lost by playing on their patch…

Every so often you come across a small detail that reminds you that it’s a different world out there. So it is when I came across someone who seemed to be in sound mind who wanted to get a credit card to pay for her honeymoon in a year’s time. The approach was critiqued (not by me) in that there’s something to be said for saving up for a consumer purchase ahead rather than starting married life in debt.

Wedding industry to young couple: Here, let’s make it less likely that your very special day will continue being special by sucking shitloads of money from your personal finances to enrich ourselves. Have a nice day
Wedding industry to young couple: Here, let’s make it less likely that your very special day will continue being special by sucking shitloads of money from your personal finances to enrich ourselves. Have a nice day

Although I’ve generally of that curmudgeonly opinion, a honeymoon isn’t exactly like buying a new TV – as long as you know what you are doing, and are prepared to accept the attendant risks it’s probably less bad than buying a car on tick; hopefully you aren’t planning to do it again any time real soon. However, it was the reply that showed me it’s a strange world out there.

Yes it will be special enough to get into debt for, at least it’s not as much as some people spend on their honeymoon 7k plus! Ours is a lot cheaper and will only take a year to pay off so well worth it, saving for us would take a lot longer and harder than paying off a card.

I’ve really tried to think of the eventuality where saving up for something ahead of time would take longer that spending the money and paying back a card. Unless you’re expecting a raise, I just can’t do it, which shows me something I just didn’t understand.

People nowadays often seem think of credit as a different sort of money to normal money. This has been a failure of education, and by education I don’t mean what goes on in schools. It is the parents’ job to educate their children into how to use the resources of this world. Preferably by example – it makes it a lot more convincing when you show your children that you have more options in life if you occasionally go without and take responsibility for your actions, rather than saying that but doing otherwise.

It wasn’t that the bad guys actually won, it is that the majority of consumers seems to have lost the fight, and are now playing in a virtual world where there are two types of money: credit, that is generally easy to get and comes in in great big lumps but goes out in little monthly repayments, and real money, that comes in in little monthly payments and never adds up to enough to make a great big lump. Ergo, you spend for a great big lump like a honeymoon on credit, and it would take longer and be harder to save up for this beforehand (scratches head in wonderment).

That logic is just plain wrong. When you have managed to tell yourself that borrowing money on a credit card and paying it back is faster and easier than saving it up front then you are so far down the wrong track that even stopping is probably not enough to save you. You need to back up a long way.

It’s such an egregious example that it showed me that the vastly increased amount of consumer credit and easy acceptance has made people think about money in a different way. I have grown up with credit; I had an Access card as a student in London but I never thought of the money on it in a different way. I’ve paid interest on credit cards in the past through incompetence and through greed. But I now understand why people are sore when they can’t get accepted for a credit card. It is because they believe that consumer credit is the only way of buying some things, and that they are therefore entitled to a credit card.

I never grew up with the belief that I was entitled to somebody lending me money.

I have no income that a credit card company would recognise, so I presume none would give me a card now despite a blameless record. If that became the case then I’d suck it up and do without, and use a debit card instead, because when I lend a bank my money I get to have the right to tell them I want to be able to use it every so often.

Money, as a medium of exchange [ref]as opposed to a store of value[/ref] is amenable to arithmetic and logic, and it’s very bad when you get that wrong and start to use voodoo economics in your personal finances. The value you place on money, in contrast, is inherently subjective. I didn’t go into debt on my honeymoon, though I did make it an exception to the cut all holidays to save for getting out of work early.

I hope the credit-card toting lady is aware that disagreements about money are a more prevalent cause of relationship grief than sex 😉

Money is one of the main topics of discord in relationships. Today, more than ever, in the current climate, it’s all about keeping a roof over our heads and feeling secure.

Denise Knowles, a relationship counsellor from Relate

It’s one of the reasons why I think that the wedding industry is ghastly – it’s aimed at people when they are hopefully young and in love and aiming to push consumer experiences at them to make as much money as possible on the back of ‘their special day’. All the knick-knacks and extras that all exist solely to push the price up. Take, for example, vainglorious excesses like the ‘ring cushion‘ – something has the sole purpose of displaying the rings as you walk up the aisle, so it has about five minutes of fame tops. And really, shouldn’t your wedding-guests be looking at the happy couple as they walk up the aisle rather than their rings carried by some oik?

Extracting tens of thousands of pounds from a couple just as they get married is about the one thing most likely to reduce the chances of that marriage lasting. It takes a long time to synchronise values enough to get a working common view on money in a relationship – years rather than months, and loading up with debt from the off makes that job much harder.

However, as long as she/they are aware of the issues and have weighed up the pros and cons then fair enough – deciding to borrow money for a honeymoon is a value judgement. However, logic shows it’s still never going to take less time or be easier to pay down a credit card rather than saving up first. The credit card enables you to Have It Now – normally at a price that means paying the bugger off  at a given amount per month takes longer than if you saved the same amount per month. Inflation is bad but it’s not that bad now.

Your risk profile is also worse if you spend money before you’ve earned it. Spend the money now and you’re exposed to the risk of losing your job or otherwise finding a more pressing need for the money. That’s the beauty of saving up beforehand, and that’s why every good salesman wants you to pay now using credit if you don’t have the money to hand – so nothing can lose them the sale!

BrightHouse – the high-interest lifestyle store

It's all about the weekly instalments at brightHouse, the high interest lifestyle store. Just as well, because the total price would scare the horses...
It’s all about the weekly instalments at BrightHouse, the high interest lifestyle store. Just as well, because the total price would scare the horses…

Another example of this kind of thinking is BrightHouse. Say the Ermine washing machine had gone titsup.  The last one served me for 15 years – I bought it as a bachelor, and replaced it around 2005 for about £250. Brighthouse will sell me a Hoover WD9616C washer dryer for £812. This already caused me a double-take – it’s been 8 years since I bought a machine, and personally I wouldn’t use a washer-dryer because using a dryer costs more energy than washing, but £800? WTF? F’rinstance this machine from Tesco, A rated and 8kg rather than 6kg washing load is £428. You could argue that BrightHouse’s free repair for 3 years is worth something, so let’s throw in Tesco’s 3-year extra warranty for £70 to end up with £500. I really struggled to find BrightHouse’s WD9616C but it was apparently a 2009 model. So for £300 less Tesco will offer me a better, more modern machine with the same warranty.

But it gets worse. I actually worked hard to find out what BrightHouse would sell this to me if I came in with my chequebook and wanted to pay cash, upfront. Because that’s not how Brighthouse works. They want you to pay for this at £10 a week, for three years, after which you will have paid nearly twice the cash price, an APR of 64%, and a total of £1560!!! The Grauniad had a gripe about Brighthouse recently, but it was only when I picked up their catalogue that I realised the horror. I couldn’t believe people really were that daft. The Grauniad cited BrightHouse chief executive, Leo McKee, who delivered himself of the following pearls of wisdom:

‘People have always had to buy beds, sofas, washing machines. This format, whereby people need access to credit in order to purchase essentials, has been there for a long, long time.’

Err, Leo, me old mucker, no. For starters, they don’t need to buy these new, never mind at inflated prices like yours. Many of these so-called essentials aren’t essentials if you have no money! I know consumerism tried to sell you the idea that you deserve it because you’re worth it, but the trouble is when you’re skint you aren’t worth it!

WTF has gone wrong with us all that people like BrightHouse can fool people that they ‘deserve it’ so much as to pay over twice the odds for a four-year old model of washing machine? Let’s see how people used to do this.

In 1989, an Ermine foolishly purchased a house paying over the odds at a 5*income multiple. I was boracic lint and had to pay off 20% of the price of the joint in the first year, though I could take a leisurely 25 years about the remaining 60%. I had saved a a 20% deposit. The Ermine’s first rule of home furnishing when setting up home was simple. If you don’t have the flippin’ money, don’t buy it – scrounge, buy secondhand or do without. I was so scared of going into even more debt [ref]I had a £10,000 interest-free credit card loan to pay off in the first year to reduce my mortgage from 4*salary to about 3*salary to avoid being rushed for various arrangement fees for HLTV) Unlike the wedding lady I knew I had passed the probationary period and my salary would rise[/ref] I bought a settee for £25. I used a cardboard box with a piece of wood over it for a desk. I hardly dared use the gas fires because I vastly overestimated how much it cost to run, because I had only been in shared houses before and assumed the heating costs would be the same. I had a borrowed television set. I patched the cheap gas cooker I bought secondhand for £10 by jumping the failed timer so the oven would work. I took my washing to the launderette up the road. I didn’t have a fridge for a year until a colleague sold me one for £15 when he moved.I used cardboard over the windows to get some sleep at night.

It simply never occurred to me to charge out and buy all these consumer goods brand new on credit. It was probably easier then in that there were far fewer consumer goods, and many of them were durable – you didn’t have to change them every year ‘to keep up’.

Absolutely everything in the BrightHouse catalogue I could live without. You don’t need a settee. Heck, when my parents first moved into their rented flat in Camberwell Green more than fifty years ago they had no chairs, no table and made do with orange boxes scrounged from the market stalls (these were wooden in those days). It’s the whole point of setting up home and being twenty-somethings in love. You’re young, you’re adaptable, you got each other, you’re in love, there’s a lovely rosy glow over the world, you don’t need to rush out and buy a whole set of brown and white goods. Buy secondhand, scrounge off colleagues, use freecyle/freegle/charity shops. Above all else, give usurers like BrightHouse the finger. The Furniture Reuse Network, a charity umbrella organisation called BrightHouse out for what it is

BrightHouse is a high-interest lifestyle store

That’s really all you need to know. If you are paying a high interest rate to maintain your lifestyle then you cannot afford your lifestyle. With BrightHouse everything costs about twice as much as it should, ergo your lifestyle is going to be halved for the simple reason that you are paying way over the odds for your lifestyle consumer items for the sake of having them three years early. Unless your lifestyle includes robbing the occasional bank in your spare time, paying twice as much for something means you can only afford half as much of it. If you want to spend money before you’ve earned it, then everything is going to cost you more. So try not to do that…

64% APR is a high interest rate. Trust me on that one... ;)
64% APR is a high interest rate. Trust me on that one… 😉

We don’t have to buy things we don’t need, with money we don’t have, to impress people we don’t like

Meh. It seems the battle is already lost. Apparently credit is the only way of paying for things larger than your monthly disposable income. Even if you’ve been living with the groom for several years and could have saved towards that wedding it’s just so much easier with a credit card. Cheaper too, probably 😉 Let me share with you why a consumer might find it’s easier to pay off a credit card or pay BrightHouse twice as much as an item is worth than to save beforehand

because self-control has become a dirty word

Without self-control, yes, it’s easier to pay off the credit card, because Bad Shit happens if you don’t – guys with thick necks and a bad attitude get to yell at you through the letterbox and harass you. You don’t want that to happen so while you are paying off your card you buy fewer gewgaws. Think of the credit card firm like a self-control loan – they charge you money to force you to save. It’s the threat of aggravation that makes it easier to pay off a credit card than save up beforehand.

As a consumer, you can fix this, because the enemy lies within. Not only that, when you get rid of the consumer credit middleman, you get a higher standard of consumer goods – because none of your hard-earned cash goes towards paying the middleman to use his money. Cut the sucker out – use your own money instead. It’s the Vimes Boots theory in action[ref]The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money[/ref].

Wonga didn’t win. We seemed to have allowed our brains to fall out and litter the ground when it comes to consumerism. Previous generations focused their spending on essentials like food and shelter, and didn’t go into debt if they could help it. There has been a long suckout in the amount spent on food and shelter, and it is now gradually rising. We have become used to having a very high level of disposal income relative to even the 1960s and 1970s, and consumerism has risen to meet the challenge and give us opportunities to spend our money, and ways to help us spend it before we’ve earned it.

The warning signs are all around us that the basics of life will probably start to cost a little bit more of our total incomes. The pressure is going to be a lot higher because we have been used to living above our means with borrowed money for a long time. In The Sun Also Rises there is a line of narrative

“How did you go bankrupt?”

Two ways. Gradually, then suddenly.


16 thoughts on “It’s not the bad guys like Wonga who won, it’s the good guys who lost by playing on their patch…”

  1. This is so sad. I think the BrightHouse stuff is another manifestation of what we have been pondering for the last month.

    What about the following hypothesis? (I’m still buzzing with the Flynn stuff.)

    These people have not been equipped with the mental tools of abstraction to be able to empathise with future-them. They simply can’t associate future suffering with their immediate actions. These same deficiencies also mean they are low skilled workers, which is a cruel double whammy. Therefore they simply can’t see what is obvious to the rest of us. These people have always been around; in fact there used to be many more. What has happened gradually over the last few decades is that we’ve become a lot better at exploiting them.

    Any thoughts?

    What is worrying about the above idea is that if true, it means that simply teaching about interest properly and enabling them to understand will not work. It isn’t a lack of ability do do the maths (though that might also be true) but lack of ability to visualise anything but themselves and in the present.

    Perhaps teaching them how to program when young might help!


    This isn’t quite the same as the following paradox but is related to how we don’t value time properly:
    – Offer someone £1 right now or £2 in a week and they generally take the £1.
    – Offer them £1 in 52 weeks or £2 in 53 weeks and they will go for the £2.
    – However, give them the choice to change their mind exactly a year later and they do so, taking the £1!


  2. Ring cushions — for pampered arse holes…

    (Excuse my French, please delete if it’s too much even if played for pun purposes!)

    Regarding this bit:

    “You’re young, you’re adaptable, you got each other, you’re in love, there’s a lovely rosy glow over the world, you don’t need to rush out and buy a whole set of brown and white goods. ”

    This is exactly what I tried to get across in my “Young People Are Already Rich” post:

    Some people have mistaken that post for meaning simply that 20-year olds are fit. Well, yes they are, but that’s just the start of it.

    They are *young*, with all the wider connotations that did and can still mean. Play to your strengths.

    Today I wouldn’t spend more than 1% of my net worth on a wedding and maybe the same again on a honeymoon, and I don’t mean that cynically. Quite the opposite.

    Perhaps if you’re 20-30 you can boost those figures to 5%. That’s enough. (If you’re over 30 but with the finances of an under 30 year old, the 1% rule still holds).


  3. @Greg I’m not quite sure it is as simple as that – from personal experience I had the same hyperbolic discounting problem for a long time, but there were checks and balances. There is a certain element of there but for the grace of God, which perhaps didn’t come out in the narrative.

    I had parents who instilled a fear of debt that was almost absolute, with the exception of housing (and they explained why – in modern terms we term it a non-wasting asset). They, in their turn, grew up in cultures that abhorred debt; you’ll still find it harder to use a credit card in modern Germany than in the UK because the memory of the Weimar inflation is still there; it’s possible this may be hamstringing resolution of the Euro still now.

    That fear of consumer debt served me well through my twenties which is the most hazardous decade of loading up on debt and into my thirties. It was hard, very hard, to lean against that £1 now instinct – I recall it as a serious fight between the intellect and the emotional centres in my mid-forties. It was only consolidated when I could look back over a couple of years and experience the gains of investment – before then I thought it would work but felt it was a lost cause!

    So I am/was not so different from the folk who use BH – it was earlier education and conditioning that protected me from the blandishments of the Access card. I absolutely agree that companies in particular have become much better at exploiting this, and Thatcher lifted the quite serious restrictions on credit that held through to the end of the 1970s. Although it looks like cynical opportunism on her part, I’m not clever enough to work out whether than was inherently an outcome of the fall of the Bretton Woods system in ’71.

    These people have not been equipped with the mental tools of abstraction to be able to empathise with future-them. They simply can’t associate future suffering with their immediate actions.

    There does seem to be a problem there, and advertising in particular pumps up the apparent benefit of the here and now relative to the future them. However, I’m ashamed to say that I didn’t realise who paid off debt until I read this which is a piece of genius. Obviously intellectually I knew that, but at a gut level I had to read that to know it.

    We have to hope Flynn is right in that intelligence is wrought from more challenging work, because we are designing societies that have a lot less stability and a lot more change in them. That brings opportunities for the able and the imaginative, but at the same time makes it harder for the less able to cope. Obama summed it up well in his 2011 State of the Union speech that in previous generations you could turn up at the local factory and get a job from leaving school.

    I don’t know how we’re gonna fix that but the direction of travel seems to be more BrightHouse, not less 😦


  4. @Monevator the term ‘ring cushion’ did give Mrs Ermine and I a titter along those lines 😉

    Don’t tell her, but I’m beginning to wonder if I’ve become tight – I spent a lot less that 1% of my net worth on getting married, the thought of spending that much brings me out in a cold sweat. You old romantic, you 😉

    We did have the advantage of 12 acres of farm to spread out in for the reception, so we managed to avoid the whole wedding industry with the exception of renting wine and beer glasses from Tesco. People seemed to have a good time, and so did we. The photos were great by pressing my SLR into the hands of our nominated lead drinks wrangler beforehand – absolutely fine as a memory and another pal shot a gonzo video using a Flip cam. Getting married is about being there in the moment and saying I do with a whole bunch of people that you care about and care about you, not about the consumer experience IMO 😉

    I did take the ‘fit’ view from your post, though it made me think of another way they are rich – they have potential. For instance it would be a total waste of money for me to spend £30k on doing a (third) degree – because though it might be interesting i could never recoup the money. I haven’t got enough time to sweat the asset. Whereas if I were 30 years younger, it might be worth it – that potential is hard to value and appreciate. The counterbalance of that is that as you get older hopefully you have turned some of that potential into accumulated wealth; it’s why the greybeards always seem to have all the money. Which I didn’t understand when I was 28, snarling into my beer about being unable to afford to buy a house in the city of my birth. The greybeards’ money was bought, however, at the price of thirty years of life doing other people’s bidding.


  5. Well, 0.5% or 1% — we can argue the toss. 🙂

    The point is the couple in your example are spending more than 100% of their entire net worth.

    Which is muppetry of the highest order.


  6. Is t he Brighthouse model different from the Radio Rentals /Rumbelows model I remember existing when I was a kid? If so, an interesting question is why did it disappear and then reappear? Perhaps the first lot died as white goods got cheaper and credit more available… And now Brighthouse thrives as disposable incomes fall and conventional credit closes the door? Bit depressing if so…


  7. @Di it’s similar I believe inasmuch as title is secured on the goods, so if you cant’ pay then

    What happens if I cannot make a payment or if my account goes late?

    Some of the options available to you may include:

    Returning your item on a pick-up and hold basis, for a period of time, until your financial circumstances improve*
    Returning your items with nothing further to pay*
    Downgrading your items, to reduce your weekly payments

    In the past there was a stronger case to be made for rental because brown goods in particular goods were more unreliable. Wikipedia seem to think Radio Rentals went bust because the business case died.

    The Grauniad article pretty much implies that Brighthouse thrives as disposable incomes fall and conventional credit closes the door? – I’d say people seem much more reluctant to go secondhand.

    @BTS I always found the booze made the subtraction harder 😉


  8. Interesting! I remember seeing them and understanding you could rent this stuff, but they’d gone by the time I was in the market. Come to think about it, have never really been in the market as sellers of our house left all the brown and white goofs, and before that we always rented! So I guess in practice I have always had my brown/ white goods “second hand”!


  9. Mobile phone contracts seem to work with the same marketing and logic, and they even manage to hide the APR completely.

    I have colleagues who are still convinced they’re getting a “free” phone with their £30/month contract (which costs £720 over 24 months).

    It’s actually quite hard to use an iPhone for 2 years without breaking or losing it, so they also pay for phone insurance, which itself costs more than my monthly bill!


  10. @Ermine

    Sir, I like a lot of what you write.

    But you keep saying that the Germans avoid credit because they remember the Weimar inflation.

    Who loses out to inflation? It’s those who’ve lent, not those who borrow. Borrowing is quite clever when inflation goes out of control. Lending is a loser’s game, as the nominal value of one’s deposit withers.

    The reason why Germans don’t use credit simply cannot be because of the Weimar folk memory, unless Germans are extremely thick about money, which is doubtful.

    Remember than (West) Germany was the economic miracle of Free Europe, while Britain decayed sank into the inflation of the 1970s. The British learnt that buying houses with other people’s money was a very canny thing to do.

    The Germans had lower, better-controlled inflation, and in a low inflation environment, borrowing money confers less of an economic advantage. The conditions for the growth of credit simply didn’t exist.


  11. My mother in law invigilates at her local cofe (if such a term still exists!), last time she went there one of the students, on seeing his paper, asked; “what does”subtract mean”?



  12. @Jonathan It seems I missed some of the subtleties because I heard these stories as a child in the early 1970s. The war was both more recent and I probably simplified.

    Logemann, Jan. “DIFFERENT PATHS TO MASS CONSUMPTION: CONSUMER CREDIT IN THE UNITED STATES AND WEST GERMANY DURING THE 1950s AND’60s.” journal of social history (2008). indicates there are deeper cultural differences that arose in the post-war period – from chapter 4 p 207

    Whereas the move of commercial banks into the consumer loans sector in the US had helped to make these “respectable” for middle-class consumers, such loans in West Germany still carried an element of shame because they were viewed as a sign of financial destitution, lack of savings or living beyond one’s means. For this reason, installment buying often accounted for up to 90% of purchases through newly flourishing mail-order-businesses, where consumers could remain more anonymous than at the local stores they normally frequented.
    Private saving rather than credit buying, furthermore, was promoted especially in the late 1940s and early ’50s as capital was scarce on the private market and investments were needed for economic growth. As in other European countries and in postwar Japan, private saving (i.e. building up the capital assets of commercial banks) was viewed by economic policy makers as vital to rebuilding the German economy. Accordingly, any diversion of private funds into consumption fostered through easy credit was viewed as a potential problem. Thus, while the American government worked to make credit for home improvement and especially mortgages more easily available, the German government heavily subsidized savings accounts, particularly those geared towards the accumulation of private capital for home construction.

    So thank you, I have challenged my assumptions and found them somewhat incomplete 😉 The events of the war did influence it, but more in the culture of post-war Germany. There is, however, some support for the hatred of inflation theory in

    As consumer credit began to expand during the early 1950s, however, the tone in ministry grew cautious and the central bank excluded installment-banks completely from its rediscount policy.Historically weary of inflation[my emphasis], the administration largely approved of this restrictive policy as a viable way to check the growth of installment debt. Various groups represented in the ministry‟s consumer council (from consumers unions to housewife‟s associations), furthermore, supported the administration‟s critical stance towards consumer credit.

    There’s a lot of fascinating research in those papers comparing German and US attitudes to credit.


  13. I remember reading the Graun article and reaching for my pitchfork and flaming torch. However on reflection I think there is a case to be made for essentially rebranded HP for technology toys. You pay through the nose until you’re bored of it and it gets repo’d. BTS makes the same point with mobile contracts.
    I see white goods as being a lot less defensible, providing you can access some savings / credit, secondhand has been good enough for decades.
    That said people don’t seem to be that daft as I’ve never seen anybody in our local brighthouse, I’ve no idea how they keep it running.
    WRT German reluctance to brandish credit cards, I seem to remember that this was true across Europe. The reasons I saw cited were the cultural equivalent of ‘fur coat no knickers’, I hope that still remains the case.


  14. You’re right that there seems to be a lack of self-control amongst many people now. I run daily at my local (free) track and I see lots of young, affluent people there being put through their paces by their ‘personal trainers’ – who are certainly not free.

    A few times, I have fallen into a chat after my run with someone waiting for their trainer, and the message I get in each case is a variant on “Yes, it is expensive, but I would not have the self-control to get down here first thing in the morning if I did not have [name of trainer]to bully me into doing it. And I’m worth it.”

    Well, when did these people lose the tiny amount of self-discipline needed to turn out for a quick chug round the track and a few push-ups? And whatever is this nonsense about being worth it? Am I missing something….


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