Catholics believe in indulgences because ultimately we know we're all sinners and need God's mercy. When a person commits a sin, there are two kinds of punishments that they have to deal with as a result of that sin. The first is called 'eternal punishment' which means the sinner can't enter heaven because of a grave sin that is not repented from. Through Christ's sacrifice we don't have to suffer eternal punishment if we repent. The second kind of punishment is called 'temporal punishment' and every sin we commit carries a temporal punishment with it.