A couple of weeks ago, I was looking for something new to experience that wasn’t going to break the bank. I had stumbled upon an ad for a local amusement park that offered fairly priced season tickets, and my gut instinct was to check it out. After comparing a one-day ticket to a season pass, I discovered that it was worth it to purchase the latter since it would pay for itself in less than two visits! After factoring in parking—it’s $20 per visit—I knew it was well worth my while to buy a season pass since general parking was included.

We’ve all seen the infomercials that advertise paying for a big ticket item in a few payments. The spokesperson usually ends their spiel about the product by exclaiming, “And for 4 easy payments of [X amount]—plus shipping and handling—this can all be yours!” For some reason, these words played in the back of my mind like a broken record when I was trying to decide how to pay for a season pass. These were the two payment methods that I was offered: pay for the season pass in full ($107, taxes and fees included) or pay in six “easy payments” of $16. The latter would require me to pay taxes and fees for each of the six separate transactions, and after doing the math, I came to the realization that it was the more expensive option in the long run!

Granted, paying for big ticket items in small increments instead of paying in full may be beneficial for some consumers, as the payments could be incorporated into the monthly budget. Many businesses take advantage of this consumer focus on the monthly payment by charging high interest rates that are embedded in these payments (think credit card minimum payments) or stretch out payments over long terms (think auto loans with 7 years of payments). Consumers who don't do the math won't see how much they are paying in interest.  

How you pay (and how much you pay) for big ticket items depends on (1) how much you save ahead of time for big purchases and (2) your willingness to buy something BEFORE you have the money to pay for it. The more that you can plan ahead and save, the less you will ultimately pay in interest to someone else. Won't you enjoy those roller coaster rides that much more knowing that they are already paid for! 

Questions:

• Which payment method are you more comfortable with? Only buying things you have the money for today or borrowing for a big-ticket purchase? 
• Why do you think companies set up these installment plans where you only have to make small payments over a long time period? 

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• Check out this video from the NGPF video library that shows how making minimum payments on credit cards can add up. 
• This blog post explains the cost of rent-to-own merchandise. 

About the Author

Danielle Bautista

Danielle is a native of Southern California and a recent graduate from the University of Maine, where she braved the frigid winters—a feat in and of itself—and earned her Bachelor's degree in International Affairs. She has a passion for working with non-profit organizations and serving populations in underprivileged communities. When Danielle isn't writing NGPF blog posts, spearheading various outreach projects, or managing contests and flash surveys, you can find her doing some sort of outdoor activity, learning a new hobby, or cracking what she thinks are witty puns!

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