THE CASH ORDER SYSTEM.

Auckland Star, Volume LVIII, Issue 113, 16 May 1927, Page 4

THE CASH ORDER SYSTEM.

A NEW CREDIT DEVICE.

WITH UNDESIRABLE FEATURES. In its last issue, the Mercantile /Gazette" warns its readers against what is known as the "cash order system," which appears to be an undesirable extension of our credit system. Briefly, the method of finance is for cash order companies or firms to issue orders to customers usually in multiples of £5. These are honoured by traders in various lines of business. j.'he recipient of a cash order for £20, for instance, pays on its receipt £1 as interest, and £1 as a first instalment towards repayment. The remainder of the debt is discharged in 19 weekly instalments of £1 each. The money actually advanced is therefore only £19, and the top-often unsuspecting consumer is deluded with the idea that the interest is only five per cent., i.e., £1 on £20. But the rate of interest is a flat rate and not five per cent per annum, not that anyone with the slightest notion of business would expect money to be lent at five per cent, particularly with such a risky class of trade. Actually, it works out at 27% per cent per annum. On the specious plea that the cash order system stimulates business, the companies issuing these orders persuade the firms upon whom they are issued, to allow a very substantial discount to the cash order concerns on the purchasers, so that the cash order people get it both ways. In Australia the system now extends to the purchase of practically everything, millinery, clothing, mercery, boots, and shoes, jewellery, musical instruments and gramophones, electrical goods, even to attendance by dentists. It is hardly necessary to point out that competition results in the cash order companies securing the highest possible discounts with the consequence that quality as a rule must suffer. The consumer, therefore, not only pays a grossly extravagant interest rate on the cash advanced to him, but he has to be content very often with an inferior grade of article.