FAIR MONEY

Face to Face with Inequality

Author Archives: Jeffrey Greger


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The State of Consumer Banking

The New York Times has a report on banks colluding with online loan sharks to defraud their low-end customers:
1. The banks charge overdraught fees when the loan sharks’ automatic withdrawals cause the borrower to be overdrawn.
2. They will let the loan sharks take only the interest on the loan even when the borrower wants to pay it back in full, so that the loan is rolled over and another round of fees can be levied.
3. When people try to stop the automatic withdrawals, the banks do not honor their requests.
4. When the borrower tries to close the bank account against which automatic withdrawals are being made, the bank will keep it open and charge fees every time the loan sharks come for a withdrawal.

Yet another incentive to stop patronizing regular banks and find a local credit union instead.


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Good with Money

I always thought that anybody might want financial advice, not only people with bulging money bags, but people with flat wallets. Folks with modest means might perhaps like more assistance?

Not so. It’s just the wrong way to look at things. Everybody we’ve talked to in the FAIR Money project turns out to be really good with money, no matter the state of their finances. They might be exceptionally good at getting amazing deals. Or they have spreadsheet they faithfully track their expenses in, down to the very last penny. Or they really know how to negotiate government services. Or they always, always pay their bills on time. Without a doubt, these are higher-order skills seems to have at least one.

For sure, if you zoom out a little, you might see that the spreadsheet contains some outsize purchases (such as a two-inch Tasmanian devil charm paved in diamonds and onyx). You might notice that the bills got paid with a payday loan. That the grocery savings were blown completely out of the water by a visit to the casino. All true. And it’s true that it would be really helpful to zoom out before disaster strikes and you run out of options; true that thinking about what you’re good at could act as a smokescreen for the possibility that you’re heading for a financial abyss.

Nevertheless, it’s important to pause over the fact that competence is almost a given. It’s easy to point out where there might be shortcomings, but surely it’s more useful to start with the strengths and build from there. And maybe then advice could be more sought after.


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Shopping for a Payday Loan

rates

Check Into Cash Rate Board

I’ve made two shopping trips and hit three payday loan stores and conclude that the situation is pretty straightforward. Around here, you can get up to $255 at a cost of $45 in each of the three check cashing stores I tried.  Must be a regulatory limit. The picture at left shows the whopping interest rate of 460% and peanuts. And you get to hang on to the loot for only two weeks.

All it takes is a paystub, your most recent bank statement (a printed version), a government-issued ID, and a check. In one store I was directed to cough up my social security number, for reasons unspecified. Social security number? When they are not actually checking your credit? I wonder if real customers feel ok just handing it over. (Perhaps I should hang out there for a while one Saturday and see what people do.)

If you compare this loan to taking out a mortgage, it is super-easy. But it’s actually not half as easy as I had imagined it to be. The printed statement is definitely a pain. And then you have to go back again, in person, at your next payday to hand over the entire $300. You have got to want that money.

Marijke


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Boudreaux’s Cafe

Today’s field trip to Boudreaux’s Cafe in San Francisco yielded a fascinating perspective on idealism in action.

A small part of the collection at Boudreaux's

A small part of the collection at Boudreaux’s

Bob and Tunisia both trade in collectibles and have opened a space in Bayview with a good portion of their stock on display and for sale. It’s a treasure trove made up of part thrift store, part antiques store, part performance space (for music and spoken word), and part tutoring center. With free coffee. Oh, and they’ve done a voter registration drive. Eventually they hope to turn into a full-fledged coffee shop, with a kitchen, but they have only been in operation for 11 weeks and have made themselves a fixture in the neighborhood and a drop-in center for anyone who wants a hug. It’s a great model for delivering neighborhood services, firing on so many cylinders at once.

Marijke


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If it isn’t fun, it probably won’t get done

Except perhaps by the most disciplined among us, and I have to admit that I am not one of them. The items that end up getting crossed off my depressingly long to-do list typically fall into one of two categories:
1. Urgency (defined by the potential for serious adverse consequences if left undone).
2. General appeal (defined by how much I feel like doing it).

Clearly, it’s far preferable to get stuff done under the second category than having to wait for it to escalate to the first. In keeping with that simple idea, I’ve adopted fun as my motto for the work I do for FAIR Money. And I’m proposing that it could be a good design principle for whatever product and/or service the FAIR Money collective decides to work on.

That doesn’t necessarily mean “gamification,” because we can think about fun in much broader terms than gaming–broader, deeper, more serious, and less ephemeral. But devising short-term rewards for the pursuit of long-term goals could be a very worthwhile endeavor.

Marijke


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FAIR Money’s First Project is Underway

The FAIR Money research collective has kicked off its first research project, visiting 8 participants at home and starting them off with on the diary portion of the study. The interviews were incredibly informative.

If you’d like to be considered for participation in this study, please fill out our questionnaire: http://bit.ly/fair-research

If you fit the criteria for our study, we will be in touch!