I have a small swimming pool
construction business. Since almost no one thinks about swimming in the winter,
and I could really use the extra cash, I was planning on offering an early-bird
special: Customers can get a discount if they pay in advance for a swimming
pool that I’ll install later. But a friend of mine claimed it may be a problem
according to Jewish law. Why would early-bird specials be a problem, and are
there any solutions?
The Torah forbids ribbit, usually translated as
“usury”—lending money with interest. Essentially, one is charging for the right
to hold (and use) the borrowed money. Rabbinically, this prohibition against
usury is expanded to include transactions where extra money and goods are given
in exchange for a benefit similar to ribbit.
The Talmud states that, as a
general rule, “any reward for waiting for one’s money” is considered ribbit and is prohibited.
For example, one’s business is suffering from cash flow problems, so he decides
to offer an early-bird discount: Instead of paying $120 when the item becomes
available, you can pay a discounted price of $100 in advance and receive the
item later. This is prohibited, since the buyer is essentially being rewarded
for “loaning” his money to the seller for the time between the payment and when
the goods become available.
There are, however, some exceptions
to the above rule.
The Talmud brings the case of one who purchases
bars of wax from a wax seller. The current rate is one dinar for four bars of
wax, but the seller offers a deal: If one pays the dinar in advance, he’ll
receive five bars of wax at a future time.
The rule is that if the seller has wax in stock
at the time of the transaction, it is permitted to sell at a discounted rate. In halachic terms, this is called yesh lo (“he has”). Since
the transaction can technically be finalized right now, it is considered as if
the buyer takes immediate ownership of the item. But if the seller does not
have wax with him, it is forbidden, as the extra bar is interest.
However, there are two important caveats:
● The seller has
to actually have the item. Waiting for an order to come from a wholesaler or manufacturer
is not considered “having the item.”
● It cannot be
stated explicitly that the advance payment is a discount for early
payment. Rather, the seller can say, for example, that the price until January
1st is $10, and after January 1st it’ll be $12.
If there is no current market rate
for the item (for example, a customized item),
then it would be permitted to pay now to lock in a rate lower than the
anticipated future rate. However, here too, one cannot state explicitly that the advance payment is
discounted for early payment.
(Some, however, disagree with this leniency.)
buyer is willing to accept full financial risk and liability for the item from
the time of the advance payment, an early discount may be offered. Thus, one
can, for example, agree to pay a farmer a discounted price for all the crops
that his field will yield in the coming year. Since there may very well be a
lower yield than anticipated, it is not apparent that this is an actual
forbidden to hire a worker and pay him a discounted rate now for a job that
will only be done in the future. Thus, in the case of your swimming pool
business, the early-bird special could be problematic.
is allowed to give an early-bird discount when leasing a piece of land or a
real estate property—and he can even specify that it is a discount—if, when the
renter gives the money, he makes a kinyan
(“acquisition”); in other words, he seals the deal to the point that both
sides can no longer back out of it.
Tuition and Camp
How does this apply to camps,
schools and other programs that offer early-bird specials? Here, too, there is
the potential for transgressing the prohibition of ribbit (at least rabbinically). Indeed, if the purpose of this
early-bird special is merely for cash flow, it raises serious halachic questions.
Some, however, point out that that the early payment is not only for
the actual program, but for all the work that will be going into it ahead of
time, such as hiring staff, developing a schedule, ordering supplies and so on.
Thus, the early-bird special is not considered “a reward for waiting for
Alternatively, some say it’s
permitted to offer a discount to one who pays a small deposit in advance, as long as it’s clear that the purpose of the deposit is
not advance payment, but to be assured that the buyer will indeed follow
As you can see, the laws of ribbit are at times complex. Therefore,
consult with a competent rabbi before making any transactions that you think
may be problematic.
Our sages remark that after discussing
the prohibition of ribbit, the Torah
stresses the fact that G‑d took us out of Egypt.
This teaches us that just as G‑d discerned between a
Jewish and Egyptian firstborn during the Exodus, so too G‑d discerns between
one who is careful with the prohibition of ribbit
and one who is not.So in the merit of this mitzvah, may we
experience the conclusion of this final exile with the coming of the Moshiach!