My reverse financial culture shock – Part I

Have you ever been out of your home country for so long that you almost forgot how things work when you returned? This happened to me last week, my first reverse financial culture shock.

Having moved back to my hometown for the next 10 months, my husband decided that he wants to join a gym. This is a brand new experience for me, since I was not a gym person when I last lived here for extended period of time. Luckily, there is one, and only one, full service fitness center within walking distance to our apartment. So without other options, we went to check it out.

It turned out to be a really nice gym and reasonably priced. However, like almost all memberships, there are many different ways to pay for it. After about 10 minutes of explanation from the sales rep, here’s what I learned:

1. If you pay by the year upfront, it’s about $636 US dollars a year, or $53 dollars a month. You can pay either by credit card or cash; there is no price difference.

2. You can also pay by the month. You are required to pay a lump sum upfront that gives you 3 months of membership. After that you can pay by the month, but only through automatic credit card payments. The automatic payments will continue for one year. In addition, you will pay by the day at a discount for the partial month at the beginning of the membership. Overall, the average monthly price is $50.

At this point I was quite confused why paying by the month would be cheaper than by the year. Ideally, we want to pay by the month since we won’t be here for a full year. However, if both require 12 months membership, there shouldn’t be any difference.

Then the sales rep dropped another payment method, off the record.

If we choose the second payment method, she could intentionally put “incorrect” credit card information in the system, which means that they won’t be able to actually deduct my credit card. Instead, I will pay by cash at the register every month before the auto deduction date. When we leave in 10 months, and thus stop making cash payments, they won’t be able to charge us.

In other words, she is trying to help us save money and break the contract without ramification.

That sounded great, until time came to actually sign the paperwork. The contract clearly obligates us to pay for 15 months of membership, or pay a $200 US Dollar fee for breaking the contract. (That explains why monthly plan is cheaper per month.)

This means that legally, the company can collect on us, even though the sales rep continues to personally guarantee that this will never happen. While I began to hesitate, she started recounting all the customers she had successfully used this method to help pay for short-term membership. She also kept stressing that her company has no intention to ever collect unpaid dues. We are better off choosing the method that she suggested.

What would you do in this circumstance?

*******

Before I tell you what we did, let me tell you the reverse financial culture shock that occurred to me after this whole transaction.

Reverse financial culture shock #1: Relationship over contract

I had forgotten that I came from a culture where many transactions are negotiable. After spending over a decade overseas, I have come to value strict transactional rules that I can follow by the letter. They allow me to function in a new country on Day One without wondering how to behave. Pricing is one of these rules.

In my home country, contract is a relatively new concept, just as legal system to enforce it is. While contract has greater power over larger transactions, such as between businesses, it plays a much smaller role in everyday transaction. For transactions that are not regulated by the government, you can haggle over price all day long. It’s also common to get “discounts” that are not on the books.

You can argue that this actually creates a more efficient market. Both sides will come to a price and terms that they are happy with. This takes away the burden for merchants to set the pricing exactly right. However, from the consumer point of view, it can be time-consuming. It also creates a level of discomfort when you never know if you are getting the same deal as other customers. (A form of this happens often to foreigners in a new country, where they are automatically charged higher prices.)

In my native culture, making a transaction happen is more important than following the written rule. Once the transaction happens, it creates a relationship that lasts for future transactions. Since I don’t stay in one place long enough anymore, I am subconsciously discounting the relationship formed through a transaction. I would much rather follow what’s written than what’s spoken.

Reverse financial culture shock #2: Favor over transparency

On the other hand, I do recognize the beauty of negotiation. In fact, I usually recommend people to ask for better deals when possible. In a contract-based economy, the worst outcome is that the other side says no. There is no hard feeling.

Nevertheless, I expect whatever deals I make through negotiations to be binding on paper. For example, if I call my cable company to ask if they can reduce my bill, and they say yes, I want to make sure my invoice shows the amount they agreed on.

In the case of my gym membership purchase, we reached a deal, but it came from a personal favor instead of a transparent agreement from the other side. The end result might be the same- I will pay the lesser price. However, I may continue to get collection letters, or have some kind of overdue record forever in their system, even if they never bother collect the fees. Furthermore, you never know whether the company will honor the same deal if the sales rep leaves her job the next day.

I believe that the globetrotting lifestyle also makes me value transparency more. Since I arrive into a new country every few years, I need to be able to understand and trust the existing system. The more the information, the better I can integrate into the society. This is one of the reasons why it’s difficult for us to integrate into a new culture without a guide, because in many societies, social rules are murky and never written down.

******

Eventually, one financial culture is not better than the other. It’s a matter of whether you can adapt to it. Through this experience of reversed financial culture shock, I did find that I miss a little bit of what I have lost.

It’s great to be able to form a relationship through financial transactions, rather than treating them only as addition to or subtraction from my net worth. It’s also liberating to be able to trust a transactional relationship enough to take and receive favors without transparency. These require us to be trustworthy, and be willing to engage in a close-knit community. Both attributes are gradually disappearing in the modern life.

As a small business owner, I also wonder what my potential clients prefer. Would you rather have a transparent pricing schedule, where you pay and receive the same service like everyone? Or would you be happy with receiving favors, or expect others to have gotten them when you don’t? I thought it’s the former, but my recent experience leaves me thinking that people secretly want the latter.

In the end, we decided to pay the annual fee upfront. Maybe I have irreversibly changed, but the proposed arrangement just nudged at my conscience. Plus, after more careful calculation, the annual option is only about $20 more over our 10 months here.

I told the sales rep our final decision and she answered,

“I understand. Many foreigners think that way.”

I didn’t tell her that I think that way too, even though I don’t consider myself a foreigner in my own country. Perhaps I have become one. I don’t know. We will see.