Paper or Plastic?
Adapted from Master Your Money, by Ron Blue
The common pitfalls in financial planning are often, in one way or another, related to debt. Debt and lifestyle go hand in hand in American society. When you use debt to fund a consumptive lifestyle, not only do you have the consumptive lifestyle working against you financially, but you also have the additional burden of debt working against you financially. Both should be avoided like the plague!
The Plastic Way to Debt
Avoiding the use of debt is incredibly difficult in America’s economy. The promotion of credit card use has made debt so easy to obtain and so difficult to resist. Credit card companies are spending hundreds of billions of dollars to entice each of us to spend and to use debt with cards that make spending “easier.” Those billions are a pittance when compared to the additional advertising dollars of retailers. When Sears introduced the Discover Card, they used Atlanta as a test market. The newspaper articles at the time of its introduction reported that Sears’ officials expected credit card usage to go up by $35,000,000,000 as a result of the introduction of this new card. Their studies showed that the card use would be incremental borrowing rather than replacement borrowing. In other words, people would be adding to their already existing credit card debt because the new card was nothing more than an additional line of credit for them.
I was talking with a banker friend of mine one day about credit card debt and how the banking industry viewed people who paid off their debt every month. He advised me that in the banking industry, a person who uses his or her credit card for convenience’s sake and pays off the debt each month is known as a “deadbeat.” What a difference a few years makes! When I was growing up, a deadbeat was someone who didn’t pay his bills; now a deadbeat is someone who does pay his bills and does it promptly! Lending institutions do not want people to pay their credit card debts each month because of the 18 to 21 percent interest that is earned on that credit card debt. If a person with an average credit card debt of approximately $ 15,500 paid the minimum payment each month, it would take twenty-one years to repay the debt, and that person would have paid nearly $ 60,000 to the credit card company. No wonder the credit card companies don’t want you to pay off your credit cards.
A Way Out
The only absolute way to avoid the use of debt, in the first place, is to have a financial plan prepared at the beginning of each year that does not allow for the use of debt. Then stick with that plan through self-discipline. The major problem most people face is how to get out of the debt that they are already in. There are only two ways to get out of debt after making the decision to avoid the use of debt: examine the assets you have to see which ones could be sold in order to reduce debt; and in the absence of assets to sell to eliminate debt, set up a repayment schedule and strictly adhere to it.
Not everyone has the luxury of selling assets to repay debt. Many of you are perhaps deeply in debt and have no assets at all. Many, if not most, Americans owe more than what they own; therefore, selling assets is not an option. The only option, then—other than receiving an inheritance or striking oil—is the slow, often painful, and difficult process of making monthly payments. You must decide, first of all, not to take on any more debt, and second, to set up a schedule of debt repayment. I recommend that, rather than a debt consolidation loan, you go directly to your creditor with the schedule in hand of how you are going to repay the debt, and that you do two things:
Pay something on each debt each month so that the creditor knows you are serious.
Concentrate on eliminating the smallest debt first. You need to have some reward quickly for a difficult project.
Start Small and Build Momentum
When you have eliminated the smallest debt first, then you can apply the additional amount available from not having to pay on that debt anymore to either the second smallest debt that you have or the debt with the highest interest rate, and on up the ladder. You will be building a momentum that is exciting and encouraging. One of the other keys to repaying debt is to commit in advance any extra income or amounts from reduced expenses—in other words, excess cash flow—to debt repayment. This is an opportunity for you to see God work in your financial lives. He will provide funds in an unexpected and supernatural way as a result of your obedience to Him.
Seize God-given Opportunities
For example, a bonus at work, a gift, additional overtime, etc. Spiritually, what you need to be asking during this time is, “God, what would You have me learn?” not, “God, why are You treating me this way?” Chances are good that God did not force you into the debt situation, but by His mercy He will enable you to climb out of that situation. “Commit your way to the Lord; trust in him and he will do this” (Psalm 37: 5). I am often asked whether couples in a heavy debt situation should tithe or not, and I have two thoughts regarding this. First of all, tithing is no more or less spiritual than debt repayment if God owns it all.
Acknowledge Divine Ownership
However, because God does own it all, a tithe, as a priority, is a statement of your recognition that God owns it all. In other words, I don’t believe it is a yes/ no question; rather, it is a question of what is best relative to the individual and the circumstances. A person must, however, bear in mind the two principles: God owns it all, and as a priority, giving is commanded in the Bible. The question of whether to use tithe money to fund debt repayment is a very serious spiritual decision that can only be made with much prayer and godly counsel. Remember, faith requires a first step without full understanding and without seeing how it is all going to work out. Getting out of debt requires elements very typical of the faith walk. In most cases for the Christian, it requires faith even to take the first step.
Faith & Finance Perspective
By Peter Burgo
I remember the first time a grocery checkout clerk asked me, “Paper or plastic?” In my naivety, I thought she wanted to know whether I wanted to pay in cash (paper) or credit card (plastic). She graciously (although clearly suppressing a smirk) replied, “No sir. I meant the bag.”
Ever since that encounter, the phrase has taken on new meaning for me. Whenever faced with a medium or large purchase, I instinctively ask myself the paper vs. plastic question (and I don’t mean the bag). In the vast majority of cases, my wife and I have chosen to use our credit cards only if we can be assured that we will pay the purchase off in its entirety before or when the credit card statement arrives. We refuse to pay any interest fees. So, I guess that makes us “deadbeats”—a title we’ll proudly own, as it has kept us free from suffocating debt.
Needless to say, not all debt is “debt-rimental.” Taking out a mortgage on a home that will likely appreciate over time can be a worthwhile investment. Financing a modest car through a low-interest auto loan—if that car enables you to travel to and from work to earn a living—can also be considered a worthy investment.
A commentary on the YouVersion website states that “permissible debt” should meet three criteria:
· The item purchased is an asset with the potential to appreciate or produce an income.
· The value of the item exceeds the amount owed against it.
· The debt should not be so high that repayment puts undue strain on the budget.
But credit card debt falls into a much more maleficent category. As the author alludes to above, this kind of debt seeks to “steal, kill, and destroy,” preying on our fallen human tendency to find fulfillment in earthly pleasures and possessions. There’s no such thing as delayed or subdued gratification in this carnal arena.
Scripture is clear on this issue. Deuteronomy 15:6 warns God’s people about reckless borrowing. “For the Lord your God will bless you as he has promised, and you will lend to many nations but will borrow from none. Proverbs 22:7 says, "The rich rules over the poor, and the borrower is the slave of the lender." Romans 13:8 states, "Let no debt remain outstanding, except the continuing debt to love one another.”
There are also scriptures warning lenders about charging excessive interest. Exodus 22:25
warns, "If you lend money to any of My people who are poor among you, you shall not be like a moneylender to him; you shall not charge him interest". Deuteronomy 23:19 similarly admonishes, "You shall not charge interest on loans to your brother, interest on money, interest on food, interest on anything that is lent for interest.”
As Christ-followers, we must be intentional about wrestling through the “paper vs plastic” issue in our spending decisions. But the higher road is to go before our Father and Maker, asking His Spirit to guide and direct every step of our financial discipleship journey. You can bank on His promise:
The Lord will guide you always; he will satisfy your needs in a sun-scorched land and will strengthen your frame. You will be like a well-watered garden, like a spring whose waters never fail.
- Isaiah 58:11