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First the Church never sold indulgences. The buying or selling of Holy Orders, Blessings or Spiritual benefits is Simony, which is condemned by the Church.
Indulgences have been attached to various actions for centuries. First however it is important to define what an Indulgence is. They are one of the most misrepresented practices of the Authority of the Church that when misrepresented by Anti-Catholics paints a picture of the Church as something it is not.
In the early Church the penances or temporal punishment for sins that had been forgiven were quite severe. From the days of the Apostles those who sinned after baptism were delt with severly. For some sins people were not allowed to receive communion until their deathbed, it could mean ten or twenty years without communion. We also have to understand that in the Early Church anyone who was unable to receive communion (those who were serving their penance, and catechumens who were learning the faith but not yet baptized) were told to leave the Mass after the sermon. The liturgy of the Eucharist was something they could not attend until baptism, or the period of penance had ended. Some were forbidden from riding on horseback, or were to wear sack cloth or very itchy uncomfortable clothing, not eat meat etc. Like today the Apostles and Early Church fathers believed that after a priest of bishop granted absolution you were forgiven by God of your offence, but still had a penalty to pay for the sin.
Over time when the Church relaxed some of the penances, there was still the satisfaction for the sins that had to be delt with. So the Church substituted the rigid penances with other practices. Indulgences were the manner that the Church did this. Indulgences could be attached to various practices. Making a pilgimage to a shrine on the feast of a saint along with confession, communion and offering prayers for the welfare of the Pope could have a 100 years Indulgence attached. Saying the Rosary every day in the presence of the Blessed Sacrament, once again with the conditions of confession, communion and prayers for the intentions of the Pope, have a plenary Indulgence attached to them. Acts of Charity, feeding the poor, clothing the naked, burying the dead, also have indulgences attached to them (Under the usual conditions, ie confession, communion prayers for the intentions of the Pope) Now since most of us no longer dig graves for the poor, or actually feed people, unless we volunteer at a soup kitchen, contributing food or money to a foodbank etc, substitute for this, as did contributing to the rebuilding of St. Peter’s in the days of Luther.
What you cannot do with an Indulgence. Protestants charge many things that are untrue. First that the Catholic Church, “Sold Indulgences” some even charge that the Church still “Sells” Indulgences. Another charge is that Indulgences are used to buy oneself or another persons soul out of hell or purgatory. Yet another is that Indulgences are a means for the Church to make millions of dollars, and allow the person purchasing them to sin.
First, Indulgences cannot be sold, they are never sold, the Church never authorized the sale of Indulgences. There was however a Dominican priest who did make up a slogan “As soon as the coin in the coffer does ring, a soul from Purgatory does spring.” Or at least that is a close translation of the German phrase he invented. He seems to have misled people into thinking that the Indulgences would guarentee the souls of dead relatives would go to heaven if someone made a contribution to the rebuilding of St. Peter’s in Rome. Fr. Tetzel’s unauthorized and misleading dealings got him into hot water. He was punished for his excesses, and lived out the remainder of his years in a Dominican friary discraced for going against the teachings of the Church and attempting to or at the very least leading people into believing something that the Church condemned.
As you read above, indulgences do not usually involve any money at all, but they are obtained for free by preforming some sort of spiritual act, be it prayers, acts of charity, or pilgimage. A visit to the Blessed Sacrament once a day or once a week, with the intention of obtaining the indulgence, as well as the “Usual Conditions” is all you have to do. If you have the intention of obtaining all the indulgences that you can obtain each day, then any spiritual actions, prayers ect that you do are means of obtaining the indulgences. You don’t have to go to confession and communion for each indulgence, just make a general intention and go to confession and communion on a regular basis, and daily pray for the intentions of the Pope. So on any given day if you pray the rosary, and offer other prayers during the day, do acts of charity, and make a quick visit to the Blessed Sacrament, you have obtained various indulgences. Many people form the intention to gain all the indulgences they can each day once a year, either at Easter, or on the anniversary of their baptism. It is called a habitual intention. Just as we can fall into habitual sin, we can also seek to make a habit of grace.
How they are applied. Nowadays most people don’t understand the old rules of 100 days indulgence or other terms that people used to know. It can also be misleading to some because they may think it means that it reduces 100 days from Purgatory. There is no real time in Purgatory like here on earth, so it refers to the time imposed in penances in the early Church. You can gain an indulgence for yourself, or for the soul of someone in Purgatory. You cannot gain an indulgence for someone else who is living, or for someone in Hell. If you do gain an indulgence for someone and want to apply it to their soul and they are in Hell, God will apply it to someone in Purgatory who most needs it. Since we don’t know who is in Hell, we should pray for and apply Indulgences to anyone who has died, they won’t be wasted. As implied in the “Usual Conditions” a person should be in a state of Grace, in other words not be in a state of Mortal Sin when we seek to obtain an indulgence.
Act of Heroic Charity. This is something we can do which is the intention of applying all the indulgences that we gain for the souls in Purgatory who are most in need. It is something we can do from now until the last breath we breathe. The important thing with this and other important spiritual issues is that we discuss it and get the permission of our Confessor or Spiritual Director. Since it is very serious, we don’t want to just say we will do it, and then be lax or lazy about our faith, only those who are spiritually strong should ask. If it becomes a problem in our spiritual lives we can ask to be dispensed, but better to have a strong spiritual life first.
Back now to the original posting and question. The Church did not sell indulgences. Fr. Tetzel became excessive with his promotion of Indulgences. The Church took care of Tetzel, however Luther jumped from condemning what Tetzel was doing to rejecting not just what he was doing but by misrepresenting what the Church taught and totally rejecting an ancient and authentic practice of the Church.