The American economy keeps spending, yet we hear that families are getting squeezed by the combination of high prices and high interest rates.  We also hear that high interest rates don’t seem to be stopping the consumer which in turn would put a turn-down on the economy making a reason for lowering interest rates.

 

In some ways that juxtaposition just doesn’t make sense.  How can America keep spending in record numbers and dollars, yet we hear the stories that families are hurting.  If the families are hurting financially, wouldn’t the spending stop?

 

Oddly enough, that’s a discussion my family had at the Easter table on Sunday.

 

Then on Monday, I found some proof from what I have long expected. . . . .There is much more than one America and there is a pretty easy explanation for all of this when you look at what is happening in credit scores.  I came across this article titled, “Delinquencies rise in February as diverging consumer credit trends emerge”.

 

The article gives some reason and rationale to the fact that America is diverging in a lot of areas. . . one of which is the ability to secure credit.  The article deals with what is called the “VantageScore” of credit.  It lists three tiers where most people fit into the credit rating categories. . . .

 

• A credit rating of between 781-850 is called “SuperPrime” and is the top category
• A credit rating of between 600-780 is called “Prime” and is the next best category
• A credit rating of between 300-600 is called “SubPrime” and is the lowest category.

 

According to the article the “Prime”, or middle, category is contracting in number of consumers and as it does those people that move out of it move either up into the “SuperPrime” category or down into the “SubPrime” category.  In essence America’s borrowers are either “Better Off” or “Worse Off” than before but less and less are in the middle-class category which has been where the essence of America has been for decades.

 

According to the article, here’s why that movement is important, “The divergent trends of healthy Superprime consumers, compared with struggling Subprime consumers, “could complicate the Federal Reserve’s efforts to effectively engineer a smooth landing because VantageScore Superprime consumers are still spending and borrowing while VantageScore Subprime consumers are finding it increasingly difficult to stay current on credit payments”.

 

So, that is interesting, but does it, or will it effect your funeral business?  I think it does simply by creating more of an inexact knowledge of who your customer is.  Is there no problem extending some type of credit?. . . . Or does this client family have no apparent means to pay the funeral services bill?  That’s a difficult problem to have and think about when sitting around the arrangement table.

 

Where does this situation go when you have settled on a services plan that costs $10,000 and the client family can only come up with $2,000 on a credit card.  Think of that with the knowledge of this recent CNBC article which states that 44% of American’s can not come up with $1,000 for an unexpected expense.

 

On Easter Sunday I also took time to catch up with some of my reading from NFDA’s The Director magazine which is delivered to my Minnesota home while I”m in Florida for the winter.  In the February edition I came across an article by Johnson Consulting Group’s Kristen Szymborski about managing cash-flow.  In it she makes this sensible comment, “Collecting fees at the time of arrangement and time of services rendered is a crucial practice that ensures a steady influx of cash“.

 

Great advice and it probably should be followed. . . . . but what do you do in my example when that family has got to the point of choosing services and then realized the total amount is not within the reach of their current financial abilities?

 

Funeral Director Daily take:  In this situation I’m probably the worst guy to ask.  By any banker or credit manager’s standard I was way too lenient on lending credit to all kinds of clientele.  Call me naive, but I simply had faith in the goodness of people. . . .Yep, I got taken a few times, but at the end of the day, I think we came out okay.

 

I don’t think there was anybody who simply did not want to pay for their mom or dad’s funeral.  Whenever I didn’t get paid there was a pretty good probability that they had no resources to pay me.

 

I also always kept President Lincoln’s quote close knowing that the only way we would be able to extend credit to those with an apparent lack of resources was that the funeral home had to be financially strong first of all.  Lincoln once said, “You cannot strengthen the weak by weakening the strong”.  

 

We didn’t accept credit cards.  You either had a preneed account or paid us by check within a week.  I’m guessing that over all we probably lost about 2% of our sales to credit loss.  But, by not taking credit cards all of the other accounts had no fee taken from us for credit card processing (this was before the advent of SeeNoFees credit card processing). . . and that 2% loss was worked back into our basic service overhead pricing.  So, in essence, maybe it is not fair, but those that paid on time and in full helped me extend credit to those with difficult situations.

 

Finally, I used to rationalize that “Nobody ever asks for a death in a family”.  Maybe it came at the worst possible time and there were other pressing needs that the family had to tend to.  I used to think “If I don’t give them a break, who will”?

 

Funny thing that happened with those families that we gave a break to via the extension of credit when they should not have qualified.  They weren’t down and out forever.  They became some of our most loyal clientele and best advocates in the community.

 

Credit and how it is extended is an inexact science.  Know your limits, know your situation, be judicious, and most of all, know your customers if you can.

 

Finally, build your funeral home’s financial base with wise financial moves so that you can have the option of extending credit if you need to. . .If you are not strong in the first place, you have no ability to help others when they may need it.

 

Related Article — What is the average credit score in the U.S.?  Experian

 

More news from the world of Death Care:

• Five things I learned from writing a book about death, Ash Harrier.  School Library Journal
• I wanted my life as a mom separate from my work with death.  I had to make room for both.  The War Horse
• Indiantown Gap National Cemetery to expand.  WHTM – TV Harrisburg (PA)

 

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