In a recent survey of 2000 households, over a quarter indicated that unsecured credit card debt had become a problem. Although the average credit card debt was placed at £1747 per person in April this year, the average interest charged on credit cards (16.68 per cent) bears little relation to current loan rates (approx. 8.5%) or the fairly modest Bank of England base rate of 0.5 per cent.
It was reported in May this year, that one in seven credit card holders is relying on plastic to pay for household bills, such as utilities. Yet, around half were reported to be also using them to fund big ticket purchases, such as TVs and DVD players. http://www.thisismoney.co.uk/credit-and-loans/credit-cards/article.html?in_article_id=505276&in_page_id=53936
Given that these two groups are not mutually exclusive, we can conclude that some households are purchasing these expensive consumer goods and yet paying some of their monthly household bills on credit.
Men have an average of £3,425 in personal debts, compared with £3,353 for women. This is an interesting statistic given the gender income disparity. A uSwitch survey reported worryingly that female shopaholics spend 19% of their income on debt repayments, compared to a national average of 8. What proportion of your pay goes to pay off debt? It takes shopaholics approximately seven months to clear a debt. How long does it take you?
So what is the truth behind the intrinsic value of consumer goods? Well, let’s look at the current icon of consumer electronics, the iPhone. Its market share rose from 8.2 per cent in 2008 to 14.4 per cent in 2009. You can buy a SIM-free iPhone 4 for about £450. Alternatively, you can get one for £99 under a 2 year £35 per month (Total = £939).
But what does it cost to manufacture an iPhone? An article published in January 2007 indicated a 50 per cent gross margin on each iPhone sale in the US :
Based on a preliminary functional Bill of Materials (BoM) estimate, the firm calculates that the 4Gbyte version of the Apple iPhone will carry a $229.85 materials and manufacturing cost and a $245.83 total expense, yielding a 50.7 percent margin on each unit sold at the $499 retail price. http://www.appleinsider.com/articles/07/01/18/apple_may_see_50_percent_margin_on_each_iphone_sale.html
If anything, the unit cost of iPhone manufacture would have decreased as production ramped up and R&D, start-up costs were absorbed. In contrast, the unit price has increased. So how do you manage to sustain this sort of margin in the competitive smartphone market? In two words: YOU ADVERTISE.
In 2007 Apple’s advertising budget was $467 million and much of it was allocated specifically to market the iPhone. The result is that the iPhone was responsible for 39% of the company's revenues in Q4 2008.
A key part of the advertising strategy is positioning. The iPhone is provided to a variety of high-profile music and sports stars free of charge. As we watch these widely-admired celebrities using these products, we assume that these products are part of that charmed world of leisurely success that they enjoy. We buy into that image and it is this assumption that drives consumer demand. It is this distinctive emotional connection called BRAND that advertisers try to build in our minds.
So what has this to do with Christ? Definitively, Jesus said ‘You cannot serve God and Mammon’. (Matt. 6:24) Mammon is the personification of worldly success and material security. It is BRAND objectified. A brand image distorts our values, so that an item that only cost $250 to manufacture is purchased for $499. If it’s bought on unsecured credit, at the typical 16.68 per cent interest, the overall cost to the consumer is extortionate. The image of success is a deception aimed at making us part with money we don’t have, in order to demonstrate that we’ve achieved a status that we can’t really afford.
These things have no power to keep us safe from hardship, or harm. They are fragile and yet we look to them for security. As Christ said: ‘Take care, and be on your guard against all covetousness,
for one’s life does not consist in the abundance of his possessions’ (Luke 12:15)
‘For the love of money (wealth) is a root of all kinds of evil. Some people, eager for money (wealth), have wandered from the faith and pierced themselves with many griefs.’ (1 Tim. 6:10) Many a debt counsellor would attest to the truth of this scripture.
Paul speaks of what repentance meant for the first-century Christians, ‘how ye turned to God from idols to serve the living and true God’ (1 Thess. 1:9)
The clear teaching of Christianity is for us to renounce the idolatry of paying inflated prices for fragile goods that simply maintain our successful persona, especially when it becomes an extravagant abuse of borrowed money. By all means get a decent mobile phone with good reception, but when advertising influences you to pay or borrow 70 per cent of a typical monthly house payment at 17 per cent interest (or spend more than £900 in phone charges over 2 years), you have to question whether Apple or any other technology company deserves a 50 per cent gross margin.
Of course, once you’re hooked on spending that sort of money through consumer credit, there’s little left over for personal or anyone else’s emergencies.