Missed posting this last week. From the NYTImesDealbook, “Platinum Card & Text Alert Via Pawnshop”:
Linda Ballard, 61, uses the word “love” to describe her banking relationship, lauding the ease of cashing her bimonthly paycheck, the convenience of text alerts about her balance and the features on the platinum card that she was upgraded to in July.
But she is not getting all this from a bank. She is getting this array of services from a pawnshop — part of an industry that has long had a reputation of taking advantage of vulnerable customers handing over prized possessions in exchange for cash.
As banks zero in on more affluent customers who promise twice the revenue of their lower-income counterparts, close branches in poor areas and remain stingy with credit, pawnshops are revamping their image and stepping into the void to offer financial services….
There are, however, plenty of potential drawbacks, consumer advocates say.
Some loans from pawnshops can come with interest rates as high as 25 percent. And fringe financial operations, the consumer advocates say, can imperil lower-income customers’ ability to save for the future. Without a traditional checking or savings account, borrowers often pay more for basic financial transactions like cashing checks, paying bills and wiring money, financial counselors say. And because pawnshops do not seek or report matters affecting credit scores, pawnshop banking makes it hard for customers to build credit history…
The basic business of pawnshops is, of course, a financial service. If a man walks in and hands over, say, a watch, the shop will lend him money based on a percentage of the item’s value. The customer has a set period of time to pay that back, usually one to four months. If he pays it back in time, and pays the interest, he gets the item back. If he does not, the pawnshop sells the item.
Pawn loans are so profitable simply because of the high interest rates pawnshops can charge. Interest rates vary by state and range from 2.5 percent to 25 percent a month, the industry group the National Pawnbrokers Association estimates. So a 30-day loan on a $150 item would give a pawnshop a profit of up to $37.50, while a four-month loan could mean a profit of $150. Pawnshops may also charge fees for things like storage and lost tickets.
Yet for many customers who have been denied credit because of checkered financial histories, an instant loan from a pawnshop can feel like something of a miracle — at least at first — consumer advocates say….
Matt McIrvin
Sure is expensive to be poor.
Big R
I had someone on the Book of Faces assert to me that $26K is not “poverty wages,” but is in fact a middle class living. When I pointed out that even assuming the most conservative figures available from the Census Bureau, that that salary left a singleton in most places in America with no margin for error or ability to save, all I got back was “well, I think that’s plenty of money for anyone living reasonably.”
What do these people think is reasonable?
kdaug
Sole experience with pawn shops is selling things that didn’t sell on Craigslist. Old cell phones, ipods, etc. Never had an issue. They pay shit, but beats having it sit in a drawer.
the Conster
@Big R:
Average rent in the Boston area for a one bedroom near public transportation is about $1200/mo. You have to come up with at least first months rent plus security deposit, and then there’s utilities.
Litlebritdifrnt
@Big R:
“Reasonable” is a) having a computer and internet access so you can print out tons of coupons b) having a computer so you can check out the local store sales and matching them up with your coupons so you can buy things for little or nothing. c) having a car to be able to drive to said stores and take advantage of the sales d) having enough money at the end of the week to put gas in said car e) having enough money during the month to insure said car f) having a super high credit score so your mortgage, car payment and credit card interest rates are not through the roof.
See it’s easy we all know that all of the above doesn’t eat into your $26K salary, I mean obviously $26K is just for food amirite?
Yatsuno
@Litlebritdifrnt: Or just have Mummy and Daddy pay for all that.
Ruckus
@Big R:
What do these people think is reasonable?
Starvation.
gbear
@Big R: Are they confusing take home pay with base salary before taxes, insurance, etc. are taken out? Even at $26K take-home, you’re still paying 50% of your disposable income for housing and have no room for ANYthing unexpected. My take-home is closer to $32K and it’s still a struggle to save any of it. Your FB ‘friend’ doesn’t have a clue.
Xecky Gilchrist
@gbear: Are they confusing take home pay with base salary before taxes, insurance, etc. are taken out?
I think you’re being really charitable. My guess is they’ve never had to worry about how much they’re living on, whether it’s their own income or their parents’ or spouse’s currently sustaining them.
scav
@Ruckus: exactly, so long as it done quietly so as not to bother anyone (although they do rather enjoy the cosy frisson of some of the details) and in such a manner so no one is inconvenienced (e.g. don’t clog emergency services when they are needed).
add “of importence” in several places if ever so slightly confused as to sides.
kc
@Big R:
It’s weird because when you talk about tax increases, $250K a year suddenly becomes practically poverty-level wages to these same people.
ruemara
@Big R: Scrounging through garbage cans, living under bushes. You know, as befits someone who dares be poor in America and show their face in public.
karen marie
I had to laugh at the “shocking” news that pawn shops charge “as much as 25%.” Credit cards for poors can be way more, and it’s hard to imagine the fees are worse than the banks.
Ruckus
@Litlebritdifrnt:
It is possible to live on $26k.
But everything has to work out perfect. Which at least in my case it never does.
But you won’t have an apartment, you will rent a room. Your car has to be paid for, in good working order and you can’t need tires or major repairs more than every 4 years. You need to be able to walk to the store(to save gas). Your driving history has to be clean and you can’t be under 35-40 or you won’t be able to afford insurance. You have to be and remain healthy as you will not be able to afford health insurance. Next year that will of course change. You will have no social life, can’t smoke or drink. Netflix will be your friend. You can’t be married unless your spouse works but then your household income will have to rise to at least $32K for food. Kids? Not even going to bother to go there.
Mr Stagger Lee
It is almost time for Forbes to come out with it’s 400 richest Americans list.
I wonder what is the cutoff point to make it? I recall when $200 million could put you there, I think last year you had to be worth at least $1.2 billion. When is enough enough? Don’t answer that.
ruemara
@gbear: Speaking to this, my take home is just under 13k a year and my rent alone is over 50%. The next person who claims public workers are overpaid, I’d like to beat to death with my bare hands. No reason.
Roger Moore
@Big R:
I’d bet the person saying that is somebody who A) hasn’t tried to live on that little money for a long time and B) had support from their family when they did. Because that’s more or less my position. I was able to do OK on that much, but it was 20 years ago, my parents gave me a drivable car, and I had enough savings for an apartment deposit and some basic furnishings. And, of course, that was a starting salary, with steady annual raises available after I established myself. If that’s your experience and you have no empathy, you’ll think the only reason somebody can’t do the same today is that they’re lazy and don’t know how to budget.
? Martin
@Mr Stagger Lee: We had a friend who was worth about $800M, we figure. He had a GIII which was nice and all, but wanted a GV so he could fly to his place in Europe without refueling (so inconvenient). Well, it turns out that $800M isn’t quite enough to own and service a GV. I mean, it probably is but the point of having one is that you have a place worth flying it to, so a home in the alps, one in Hawaii, a few others… and that cuts into your income quite a lot. Plus you need a pilot. And you need the income to send your chef ahead of you (because putting them in your 16 passenger jet is icky), and so on.
Well, it turns out he was only worth that for a period of a few months, but was so leveraged that the commercial real estate downturn pretty much busted him, but he had enough assets in the game that he could play 3-card monty with the world for about 3 solid years, until he died in a plane crash and his wife inherited the mess and was both unable and unwilling to continue the charade. She managed to set aside enough cash to buy a 3BR home and protect it from the bankruptcy, but lost everything else. She’s now working full time trying to support 3 kids driving an old Camry and drawing food stamps.
Too many lessons in there, none of which will actually take root with the countless people from our so-called job creators to Congress who need to learn them.
WereBear
@Roger Moore: Also, many people have resources in case something goes wrong; a relative can let you borrow enough to get the car fixed, or you have a credit card with a decent rate of interest and enough spending flexibility to increase the payments every month.
If you don’t have a source of capital, if you don’t have a credit card, if you scrimp and scrape and still can’t save enough for a cushion; then one thing goes wrong and you are very, very, screwed.
Temporarily Max McGee (soon enough to be Andy K again)
@Ruckus:
Well, it is relative. Depends upon in which part of the country you live. I’m getting by on less than $26K/year, and I do have an apartment and a car- but I’d be in trouble if the car needed repairs. Not much of a social life.
Ruckus
@Roger Moore:
Was talking a couple of years ago to a friend who got her degree from a cal state school. She couldn’t understand why kids didn’t just go to school and get a degree today. I had to explain to her how much it costs today to go to school. It is several times what she paid plus living expenses are much higher. And most kids who would end up at a state school, their parents probably couldn’t afford to pay what her parents paid for her to go to school, let alone what it costs today, due to wage degradation. And this was using a cal state school, try to go to a university or a private school and see what that costs.
Many people are either old and have had no reason to understand(my friend) or just have no clue about, well anything.
Steeplejack
@Big R:
And let me guess: this person was not him- or herself “living reasonably” on anything approaching that low an amount of money.
They always provide such great advice. Personal examples, not so much.
Steeplejack
I still remember the Happy Hocker in Marietta, GA.
Botsplainer
@Big R:
I see a lot of budgets, most due to divorce and child support matters, some due to a handful of annual bankruptcies. Even in cheap rent areas, a family can’t find decent housing for less than $850-$1000 a month. Groceries run about $600. Utilities + phone and cable/net access total $500. Car insurance is another $150, and gas $300 a month. That doesn’t count licensing fees, taxes, health insurance, recreation, clothing, dry cleaning, the barber…
BillinGlendaleCA
@Botsplainer: Barber? Now that’s living high on the hog there.
Roger Moore
@WereBear:
The other thing is that kind of experience looks better as a hazy memory than it does while you’re actually living it, or even when you’re remembering carefully. The more I think about it, the more I remember my miserable studio apartment in a not so nice neighborhood, worrying about not being able to do anything if my car died, having no computer, relying on free entertainment, not eating well, etc. And that was with 1994 dollars. I can’t imagine trying to live on the same nominal amount in 2013.
Litlebritdifrnt
@Botsplainer:
My friend next door caught her spouse cheating several years ago. They worked it out. She said that neither of them could afford to live separately or to pay child support to the other if they split.
Ruckus
@Temporarily Max McGee (soon enough to be Andy K again):
I lived in OH for a decade and thought that life would be grand because the cost of living was so much less than CA. Bullshit, at least for me. The only cost that was less was initial price of a house and gas was sometimes a little cheaper. My rent was not cheaper, food wasn’t cheaper, insurance wasn’t cheaper, taxes were not cheaper, in fact property tax % was quite a bit higher. The saving grace on ptax was the basis was lower. OK my car plates were cheaper but my DL cost more. So I might have been able to stretch things a bit farther but then came winter and the heating bills.
And of course your mileage may vary but it is difficult anywhere, which we all understand. Many of us on this here blog are living or have lived with income of less than $26K. My SS works out to a wage rate of less than $25K and I can survive. But that’s all it is, survival. I have no life.
catclub
Where did I hear the story: Go into small town, have expensive ring appraised for pawn loan, pay off loan and then turn around and ask for another pawn loan,but swap in cheap copy. Leave town.
? Martin
@Botsplainer: Uh huh.
2012 Poverty Guidelines for the
48 Contiguous States and the District of Columbia
Persons in
family/household Poverty guideline
1 $11,170
2 15,130
3 19,090
4 23,050
As a single I could get by okay on $26K now that college is paid off. With a family? Forget it. With $40K of college loans on me? No way.
Also worth pointing out that the same people who think a debt to GDP ratio of 60% like the US has is simply criminal and irresponsible, and who believe that the federal government is just like balancing your checkbook, are simultaneously arguing that laborers should accumulate massive debt to justify the low wages they propose.
The average college student last year graduated with $35,200 in debt. Assuming the 60% US debt/GDP is a ceiling, that student would need a starting salary of $58,600 – about 15% above the national median household income. At $26K, they’d need to leave college with just $15,600 in debt, which is about the financial need for one semester at Cal State.
These people are utter, complete hypocrites. And they suck at math.
Botsplainer
@? Martin:
Troubled middle daughter’s only real friend in high school (and first disastrous college roommate) is the daughter of the Sydney Hoax Collar Bomber. That was one strange dude – I was always puzzled by the fact that he never wanted to meet us when staying with his kids and ex-wife, despite the fact that he was a money guy and I previously had been registered to create offshore businesses in Anguilla, and my wife knows folks with serious bucks all over Australia. As the story popped, it became clear why he’d tucked his family away in a quiet corner outside Louisville – he’d blown over a billion of Hong Kong and Pacific Rim investor money on taking the losing side of swaps in 2006 and 2007.
Those are the sorts of investors who don’t see it as “just business”. The crime he committed was one of desperation, but at least his family was safely aside from retribution from his investors. They are dead-assed broke at this point.
Ruckus
@Mr Stagger Lee:
Enough is an elastic term. Depends on if they are talking about you or me or the 1% themselves.
For you and me survival is more than enough, for the 1% there is no enough. It is not a term that applies to them, not that they would apply to themselves. Read Martins post about the fellow with something like 800million he knew who wanted a bigger jet so he wouldn’t have the inconvenience of having to refuel. And it wasn’t enough. There is always a rationalization for more, never one for this is enough.
Mnemosyne
@Botsplainer:
I think the previous thread died before you saw my query, but has said daughter ever been screened for ADHD? The symptoms for girls are different so most of them get overlooked. It may be worth finding a good ADHD doctor to at least get that ruled out.
A lot of what you’re saying about her struggles sounds very familiar to me, but I didn’t get diagnosed until I was in my mid-40s.
Citizen_X
@Big R:
Left unstated: “…because it was back when I was 25, 40 years ago.”
Botsplainer
@Mnemosyne:
Never considered it. My mother mentioned it a week or two ago, and I figured that IF she goes into counseling, that the counselor can recommend the screen.
Mnemosyne
@Botsplainer:
I wouldn’t wait for the counselor — unless you have an ADHD specialist, a lot of them will miss it in girls/women because they’re looking for the classic “boy” symptoms (physical hyperactivity, defiant behavior, etc.) I was in depression therapy for 7 years and my otherwise very good and helpful psychologist never picked up on it, because she had no training in it, but the untreated ADHD was the actual source of my depression.
ETA: Or, if you do wait for the counselor, you need to insist on getting her an ADHD screening, because I can pretty much guarantee you that most counselors dealing with a young woman won’t even have ADHD on their radar.
Botsplainer
@Mnemosyne:
Boy, some of those sound REALLY familiar. Her sisters haven’t been afflicted by those, but that top batch describes a lot of what happened to her.
Pogonip
@karen marie: I have a “variable rate” credit card which, if I were ever so unfortunate as to have to carry a balance on it, could go up to 24.99%. I fail to see how this is so much better than a pawn shop,s 25%.
Mnemosyne
@Botsplainer:
I just found out a couple of months ago that hyperactivity in girls is often expressed verbally (i.e. being “motormouths” who can’t stop talking) rather than physically (i.e. running around breaking things). That sounded way too familiar, to say the least.
ETA: The depression is usually a result of the ADHD and not an independent problem — you keep being unable to stay organized or do your homework or pay your bills on time, and you can’t do it no matter how hard you try, and those failures make you depressed/anxious, which is different than “true” depression.
gbear
@? Martin: Martin, just so you have a number to beat people over the head with in an argument about college costs: When I started at the University of Minnesota’s Twin Cities campus in 1972, tuition was $325 for a standard credit load (3-4 classes) per quarter. It was still well under $400/quarter when I got sick of the U and living at home and quit school to play in a band.
Ruckus
@? Martin:
This.
And that poverty amount is only enough if you don’t have a car or even need to use public transportation. It may pay rent in a crappy room and basic food but that is it. You better not need a jacket for winter or insurance of any kind, your paycheck better come in the form of cash because you for sure won’t be able to afford an account at Bunch of Assholes, and you will most likely be one sad son of a bitch.
weaselone
@Pogonip: Your credit card rate is an annual rate, the figures given for pawnshops are monthly. Also, unlike your credit card, pawn shops are going to charge interest even if you pay off within the month.
Kropadope
The law will protect the bank’s ability to determine the terms in any contract you sign with them, but they will not provide you the same courtesy. When you try to band together to strengthen your negotiating posture, you are not an entity protected by our reverence to free market principles, but a fire to be put out.
Matt McIrvin
@Roger Moore: Yep. I lived on a smaller stipend than that as a graduate student. But I lived alone in a literal hole in the ground, like a low-class hobbit, rented from a man who could have gotten twice as much for it in that neighborhood at that time. I had a sink and a hot plate in lieu of a kitchen, and I ate a lot of Kraft Macaroni and Cheese and canned soup. And I knew I had a family to run away to if it ever got really bad, and that it wasn’t going to be forever.
And it was 20 years ago: general inflation hasn’t been high since then but it adds up to something like a factor of 2 in prices of everything other than electronics, and way more than 2 in rent.
Matt McIrvin
…oh, yeah, and said family bought most of my clothes.
Smedley Darlington Prunebanks (Mumphrey, et al.)
There’s so much to hate about how poor people get fucked 17 ways in the U.S., and then to have snotty assholes who never had to worry about anything shit all over them on top of that… I guess what galls me most is this almost taken for granted assumption that poor people have no right to make any mistakes. Read any story in any newspaper or magazine about some poor person working her (seems like most of those I see are about women) ass off to stay afloat who nonetheless has some calamity befall her, and then sees everything fall down around her head. The stories are written to show how hard it is living poor here, but you read the comments, and, I swear, three fourths of them are assholes who are angry at the woman. They’ll pore over the story to find one thing she might have done wrong, one thing she might have done better, one mistake she made, and they’ll harp on it, post after post after post.
It’s so sick. I mean, O.K., I can see that if you’re a run of the mill asshole, you could think that the woman had it coming, that she oh-so richly deserved to suffer for whatever she did “wrong”. That’s vile and hateful and depraved, but I can see how people might smugly feel that way. But it goes beyond that. People get pissed off. They write about these people like they hate them. These are women who get no breaks in life, and struggle to get by, and something bad happens and they can’t keep afloat, and the readers get offended by, well, by everything about these women. What seems to piss them off the most is that they seem enraged that the story even treats them sympathetically. That’s what really floors me. These are people who work, work, work, who, as we say, play by the rules, who, as conservatives tell us they should be doing, try to pull themselves up out of poverty by hard work and determination, and onlookers take glee when they fail, and actively resent that some of these people even get any sympathy from anybody.
Sympathy doesn’t cost these turds anything. And nobody’s even asking them to be sypathetic at all. It would be nice to at least feel some spark of compassion for the poor, and they’re free to withhold even that. But it angers them so deeply that anybody at all should harbor any kind feelings or good wishes for them at all. It isn’t enough that they hate these people; everybody has to hate them before they can feel happy. And that’s the real mystery to me. I cannot for the life of me understand this kind of thinking.