Is Consumer Debt Really That Bad?

Credit cards are usury! Flip “the system!”

Consumer debt is related to the prohibition against usury. The sin of usury has to do with exploiting the necessities or fallen passions of the poor. We are not talking about business loans or reasonable mortgage lending to the wealthy and middle class. Usury is a sin against the poor. The Fathers of the Church tell us that what we owe to the man in need is not a loan on interest, but a gift. For example, if a Christian man is out of work and does not have enough money to buy food for his family, he should not be given a loan on interest. His community should do their best to help him find work. This would be the just thing to do. And concerning the fallen passions of a poor man that might entice him to borrow money so he can fuel his unbridled, fallen passions—to lend him the money, expecting repayment or not, is not only usury but a lack of prudence and true charity.

For these reasons, I think it is easy to make some important distinctions about contemporary society. Credit cards with an interest rate of 18% or more, a year, seem to clearly be usury. Loan sharking and some pawn broking could also be a form of usury. But a mortgage for a house or a business start-up loan are not examples of usury. Neither is buying corporate bonds or most types of investments

The Poor Are Also Responsible

Another important clarification is this: usury is not just the sin of a rich man against a poor man. The poor man also has a moral obligation not to accept a loan that will worsen his financial state. As my financial mentor used to say, “We need to weigh our ego against our bank account and ask ourselves which one we want to weigh more.” Ego inspires a man to keep up with the Joneses by going into debt. This is a sin of the consumer, not the lender.

The borrower makes himself a slave to the lender. Most Americans need to radically downsize their home, their cars, and their food & entertainment budget. The personal debt load in America is obscene and totally irresponsible.

The poor man needs to be humble and seek help in emergency cases, instead of proudly pushing his household or himself into financial ruin. The principle of subsidiarity recognizes that the borrower, himself, is the one who is best positioned to judge whether taking a loan will be beneficial in the long run or not. So, the moral burden falls mostly upon him. It is not possible to regulate lending in a way that takes into consideration all possible scenarios. The lender must consider the risk before making a loan.

We need to educate our children about how to manage our household finances well. The wealthy teach their children financial stewardship, which is the reason they are wealthy. Financial education is important for high school children, in particular.

There are certain things that need to be learned, for example—not to apply for a credit card that has a high interest rate, the importance of paying off a credit card within 30 days, the difference between buying a house with a mortgage you can afford versus buying a house you are qualified to buy, etc.

The Church used to forbid consumer loans because it assumed a Christian population that was striving to live within one’s means and a majority population practicing some sort of subsistence farming or fishing. For most of history, no wise man ever thought it was a good idea to go into debt for luxuries he couldn’t afford. This may sound harsh, but Scripture and the Fathers of the Church teach us that borrowing money for luxuries is the habit of a fool. These principles have not essentially changed just because we live in a modern economy with fiat currency:

“Do not indulge in luxuries, lest you become impoverished by their expense.” (Sirach 18:32)

“There is a man who buys much for a little but pays for it seven times over.” (Sirach 20:11)

“The borrower is the slave of the lender.” (Proverbs 22:7)

“He who loves pleasure will be a poor man.” (Proverbs 21:17)

“One man pretends to be rich, yet has nothing; another pretends to be poor, yet has great wealth.” (Proverbs 13:7)

“For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it?” Luke 14:28

“Do not seek after luxury, that you may not be forced to the shame of begging. It is better to want necessaries than to borrow for superfluities.” (St. John Chrysostom, Homilies on 1 Timothy, Homily 14)

“Luxury has no limit; it is not possible to satisfy it. The more you yield to it, the more it will demand.” (St. Basil the Great, Homily on Psalm 14)

“Their property held them in chains... they think of themselves as owners, whereas it is they rather who are owned; enslaved as they are to their own property, they are not the masters of their money, but its slaves.” (St. Cyprian of Carthage, On Works and Alms, 11)

“It is not poverty that is evil, but the desire for wealth; nor is it wealth, but avarice. Riches, then, are to be partaken of if they are obtained justly and used rightly.” (St. Clement of Alexandria, The Instructor, Book 2, Chapter 3)

“Let us not look to what is superfluous and useless, but to what is necessary and helpful for life.” (St. Gregory Nazianzus, Oration 14, On the Love of the Poor)

“Many go out to buy necessities and come back having purchased luxuries.” (St. Jerome Letter 52: To Nepotian)

“He who loves pleasures and luxuries cannot preserve his riches; and he who loves God will despise these things as though they were dung.” (St. Maximus the Confessor)

“Blessed is he who is content with his necessities and does not seek the excess of riches.” (St. Ephrem the Syrian, Hymns on Paradise, Hymn 7)

Most people would prefer not to take responsibility for their gluttonous consumer choices. It is easier to blame credit card companies, the rich, and the banking system for one’s debt problems.

Yes, the rich make money in four ways:

They sell you things you need

They sell you things you don’t need

They lend you money to buy things you need

They lend you money to buy things you don’t need

But who is responsible for discerning and spending money on things we need and abstaining from things we don’t need? We are responsible—the consumers. No one is forcing us to get into debt for things we don’t need. Manipulating us through a trillion-dollar advertising industry; maybe; but forcing us to spend beyond our means, no. We have free will. It is better to blame the devil. He has been up to his game of tricks for a long time.

Do you want to go to war against the enemy for the souls of your family members? Write a budget every month with your spouse and stick to it. If the numbers tell you, you need to downsize your home and your car, do it. Save for future expenses you know you will have, for example, your next vehicles, a replacement roof for your house, etc. Stop overspending, pay off your debt, and start saving/investing for the future.

Even more importantly, figure out a way to sell people things they need or lend them money for things they need, e.g. a house or a business. We can do this by working in someone else’s business, owning our own business, or buying shares in someone else's business. Most poor people need to spend more time figuring out how they can increase their skill, expand their social networks, and make more money instead of complaining about “the system.”

“The system” is called capitalism and it works a whole lot better than communism, so learn the system and how to virtuously provide for your family in it and you will be content. The goal is not to be ultra-wealthy unless you believe you have a vocation to be a benefactor of the Church. The goal is to be able to provide for our families and have a little to spare for works of mercy and the support of our parish.

Need help budgeting or getting out of debt? Consider financial coaching.