In my past few blogs I have written about places that are trying to rip you off. Car dealerships that brag about financing to people with terrible credit, attorneys trying to convince people that it’s smart to file for bankruptcy and banks telling you that borrowing money will help you get out of debt. All ridiculous, right?
Well, today I’m going to begin a series on a few other types of businesses that are trying to rip you off. I’ll start with one of the worst – cash advance places. Not that long ago they didn’t even exist. Now they are about as common as gas stations. You see them on every block. Fortunately, some states have made them illegal. But there are still plenty of places where they are everywhere.
The way these places work is pretty simple. You go in, write a check that they hold, then they give you the money and cash the check on your next payday. Sounds easy, but there’s one problem. The amount you write the check for is, of course, more than the amount they give you. A whole lot more. That’s how they make their money. They charge you to take their money. In many cases it comes out to an annual rate of 400% or even more. Basically these places are like loan sharks in a strip mall.
It may sound harmless to borrow one time. But very few people borrow just one time. And these places know that. If someone writes a check for more than they borrow, then when that check is cashed they will start off their next pay period in a hole. Then they’ll go back and borrow more to catch up. Then again and again. That is exactly what they want you to do. They are like drug dealers who want you to get addicted to what they have for sale.
Something similar are places that charge you a fee to cash your paycheck or pay bills in person. They are taking advantage of people who don’t have a checking account because they are convinced they cost too much money. Meanwhile they pay a few bucks here to cash their check and a few bucks there to pay their power and cell phone bills. But those few dollars here and there add up every month. There are many banks that offer free checking, but even if you pay a small fee it’s a lot less than what you’d pay to these places. Avoid them at all costs.
Ever notice these types of places are usually not in the best neighborhood? You tend to see them in the same shopping complex as liquor stores, laundromats and pawn shops. You never see them right next to a country club. Why is that? Many people may be thinking it’s because those who live near country clubs don’t need them. Wrong! It’s because people in nice neighborhoods would never use them. They don’t avoid these places because they’re rich. They’re rich because they avoid these places. Think about that!