Buy now and pay later is a concept that has been around since money first came into being. Over time, various systems have been used to keep track of how much money is owed and to whom, although until the 1940’s, they were specific to individual merchants. In 1958, the Bank of America launched the first true credit card, that is, a revolving credit card issued by a third party that is accepted by a number of different merchants. Their global success since then has been due to their convenience – the ability to quickly and easily take out several small, short term loans within the approved credit limit. Many credit cards offer other benefits such as travel insurance, and reward points. New Zealanders currently owe just over $6 billion on business and personal credit cards. This amount has been steadily increasing by 4-5% a year; that is by more than the rate of inflation. The average interest rate paid on interest-bearing balances is just over 17%, and the average interest rate on all balances is just over 11%. That’s around $660 million a year in interest in ball park figures. Added to that should be the annual fees for operating a credit card account and the surcharges that some merchants charge for using a credit card.

Of course, there are some credit card fans who argue that providing the balance is paid off in full each month, no interest is payable and therefore it is cheap credit, sometimes with the advantage of being able to accumulate reward points. However, there is clear evidence that using a credit card encourages people to spend more. If you are serious about wanting to spend less, use a debit card instead. What you lose in reward points you will more than gain from increased saving.