Let it be a motor-cycle or a new deck plus jacuzzi: the world is full of temptations. Often enough, what you got in your pocket doesn't allow for your new gadget or long held desire. A great many retailers offer consumer-credit to make your wish come true, despite empty pockets.
Now, there are a few things to keep in mind:
Whenever you finance something you can't haggle over the price. In the very competitive market for durable consumer goods, paying cash can result in considerable discounts.
The other aspect is that by financing, you pay a lot more than the asking price.
Let's have a look at that:
10.000€ at 5% for 3 years results in monthly payments of some 300€. In the end you pay 36 months times 300€ which equals 10.800€. You not only did forgo the chance of a discount, you also paid 800€ extra.
Take your typical credit-card, the interest rate will be somewhat around 10% or more. Looking at the same 10.000€ credit, your monthly installments will be some 323€ and the final sum is around 11.630€. 1.630€ more than the asking price, again no discount. Divide those 1.630€ by your hourly salary and then ask yourself whether that motor-cycle is necessary now!
Am I saying that all credit is bad? By no means no. When you are looking at mortgages for a home or credit for college that is all a different story. What I recommend, however, is that you pay close attention to the extra money you pay for having things that are not instantaneously necessary. To stay with the above example, 1.630€ extra is a lot of money, when compared with most peoples monthly net wages.
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