Buy Now, Pay Later Is Older Than You Think
With the Fourth of July coming up, we wanted to examine a financial system as old as America itself.
Buy now, pay later might be a growing trend, but the idea isn't new. Long before there were apps or brightly colored "pay later" buttons at checkout, there was still a credit system. It was just slower, and moved by ship instead of broadband.
In the 1700s, credit had the same qualities it does now. It was straightforward, but easy to fall into. Colonial Virginia (sadly for them) was a great example. Their main export was tobacco, which planters sold through British merchants. Those same merchants also sold planters the tools, clothing, and household goods they needed to work and survive. These relied-upon goods came on credit, and were often shipped before the planters knew what their harvest was worth, a tough position to be in.
Like some institutions today, the British merchants controlled both parts of the deal. They had a heavy hand in what the tobacco sold for, and in the cost of the goods Virginians depended on. When the British lowballed them for their tobacco, the planters had no leverage. They needed to pay down their debt, so they often accepted whatever low price was offered. Not so different from the way a minimum payment can keep a balance, and its interest, rolling along for years.
Farmers weren't the only ones to get mired in credit issues. George Washington's debts climbed year after year before he figured out how to handle them. Thomas Jefferson, who wrote the Declaration we celebrate this weekend, loved French wine and rare books a little too much, and died owing a fortune. Brilliant men, same trap.
The tools change. The pull to spend a little ahead of ourselves does not, regardless of what century it is.
From all of us, happy Fourth of July. We hope you get to slow down this weekend and spend it with the people you love.
This material is intended for informational and educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.
Buy now, pay later might be a growing trend, but the idea isn't new. Long before there were apps or brightly colored "pay later" buttons at checkout, there was still a credit system. It was just slower, and moved by ship instead of broadband.
In the 1700s, credit had the same qualities it does now. It was straightforward, but easy to fall into. Colonial Virginia (sadly for them) was a great example. Their main export was tobacco, which planters sold through British merchants. Those same merchants also sold planters the tools, clothing, and household goods they needed to work and survive. These relied-upon goods came on credit, and were often shipped before the planters knew what their harvest was worth, a tough position to be in.
Like some institutions today, the British merchants controlled both parts of the deal. They had a heavy hand in what the tobacco sold for, and in the cost of the goods Virginians depended on. When the British lowballed them for their tobacco, the planters had no leverage. They needed to pay down their debt, so they often accepted whatever low price was offered. Not so different from the way a minimum payment can keep a balance, and its interest, rolling along for years.
Farmers weren't the only ones to get mired in credit issues. George Washington's debts climbed year after year before he figured out how to handle them. Thomas Jefferson, who wrote the Declaration we celebrate this weekend, loved French wine and rare books a little too much, and died owing a fortune. Brilliant men, same trap.
The tools change. The pull to spend a little ahead of ourselves does not, regardless of what century it is.
From all of us, happy Fourth of July. We hope you get to slow down this weekend and spend it with the people you love.
This material is intended for informational and educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.