If financial education tops the list for why a significant gap remains, I believe our attitude and mindset towards money and wealth creation vies for a close second. Ultimately, however, lack in both areas and unprecedented exposure to the predatory practices which plague our community are what keeps us engaged in anti-wealth building behavior.
Here are 5 financial scams I wish Black folk would just stop allowing to flourish off of our financial demise. If not for our generation, perhaps for the next.
1. Check Cashing Centers – We have allowed check cashing services to thrive on every corner in every ‘hood across our nation. Why? Because somewhere along the way we were told that they were more “convenient” than opening a bank account. Maybe the convenience comes from the fact that most centers double as the neighborhood corner store, as well. Nevertheless, the astronomical fees charged at check cashing centers cannot truly be beneficial for anyone.
For example, cashing a $1000 dollar check might incur a 3-5% fee, regardless of the origin of the check. That is an average of $40 in fees. Even a 1.5% fee would be $15, while most banks that charge monthly service fees, charge an average of $10 per month and allow unlimited check cashing privileges or better yet, direct deposit.
Even for those that would argue that a negative banking history prohibits them from enjoying a traditional bank account, there are sites like http://www.getsecondchancechecking.com/ that offer second chance solutions for those that have been added to ChexSystems.
Related Post: 5 Bad Habits You Need To Break In 2011
2. Pay Day Loans – I know we all trusted Montel Williams in the 90s and want desperately to believe that he could do us no wrong, but those commercials assuring that pay day loans are the most trust worthy way to handle emergencies are a death sentence waiting to happen! Why would it ever make sense for someone who earns $800 per month to be eligible to borrow $1500? So when you’re paying off this $1500 in 30 days how are you supposed to survive in the mean time? Once you give them all of your next paycheck, not only will you still have a balance, but you will incur additional interest, penalties and fees daily while still having your normal expenses to worry about. Is that really peace of mind?
3. Title Pawn Loans – I’m not sure how long the title pawn business has been around, but my have we allowed them to blow up substantially since this recession. These businesses have taken root in every urban shopping center across the country. But do we even realize that car title loan companies are known for having interest rates that would make a loan shark blush? While the average interest rate on a so-so credit card may be in the mid to high teens, the APR on title loans can reach triple digits. A past client of mine had an agreement which showed a 250% APR. (Don’t see the monthly APR of 20% and think you’re ahead of the game. Look at the total life of the loan to get realistic numbers.)
In addition to high interest, these car title loans usually include a number of “mandatory” fees that add up quickly. They include processing fees, document fees, late fees, origination fees and lien fees. The cost of all these fees can be anywhere from $80 to $115, even for just a $500 loan. I once read a report that shared one woman’s horror story. She paid $400 a month for seven months on an interest-only payment term for a $3,000 loan. After paying $2,800 in interest, she still owed nearly $3,000 in the eighth month.
If you find yourself contemplating a car title loan, check out these alternative options and read the information for yourself at www.responsiblelending.org or www.consumerfed.org
4. Foreclosure Rescue - According to the US Government Accountability Office, the two main types of foreclosure rescue and loan modification scams are advance-fee loan modification schemes and sales-leaseback schemes that promise the world for a fraction of your monthly mortgage. In either case, victims desperate to save their home fall prey to those that have set up shop only to step on the backs of people who are already lying face down. Unfortunately, this again is where financial education comes in. Although I wholeheartedly sympathize with many who have undergone mortgage default and foreclosure, many of us truly bought homes we could not possibly afford in the first place because we trusted someone else’s word and did not perform our own due diligence. When times got tough, again, we were so busy calling on the Lord, it’s been estimated that more than 50% of us didn’t pick up the phone to even discuss our circumstances with our lender. The Lord provided customer service representatives to help us, but we instead trusted someone else’s word and allowed scoundrels to make a bad situation worse.
Related Post: Black In America: Are You Delusional Too
.5. State Lottery – There are very few ways that you will get rich quick unless your name is Cam Newton and you just won the Heisman, yet 15% of Americans believe their retirement will come from “hitting the lotto.” Most of us will have to work diligently and plan efficiently. I know more people who spend $20/week or more on the state lottery and swear they don’t have $25 a month to put toward their toddler’s college education. The notion that if you hit the lottery, everything will be fine is crazy at best! If the average lottery addict put that money into a mutual fund or even into pursuing their own hustle, they could get a much better return. The small high that comes each time a $1 scratch off produces a $5 win is ridiculous when you think about the $80 that probably went into getting that one “lucky ticket.” And, no, I’m not buying the “I’m supporting the school system” theory through playing the lottery either! How about you read to the kids and support the school system that way OR better yet, pay your property taxes!
Understand that I am not insensitive to the daily grind and struggle that goes on in the ‘hood. How could I be when I’m grinding with you? We all have been caught in a jam at one point or another and face tough choices, but at what point do we stop falling for the okie doke? Yes, the circumstances suck, but we can no longer continue to pass the buck. At some point, we must take responsibility for our actions and what we’ve allowed to take place in our community. Are we exposed to these schemes disproportionately? Yes. But, can they only stay in business because we single-handedly remain their number one consumers? Absolutely.
Related Post: Is The Black Church Really To Blame?
Until Next Time,
Seek Wisdom, Find Wealth & Be Blessed
41 comments:
Very eye-opening information.
I don't think the grind only comes from the hood but anywhere. I think these are many scams that really plague a lot of people. The only thing I think is "our" community isn't educated on how to use these resources - if necessary. I figure as Blacks, we really don't like to borrow money but when we do it's never a good thing. Repaying and saving is just not in our genes.
Thanks for writing the post! Very much needs to be read. We have to educate!
Thanks, Drew-Shane. I know that tons of people fall prey to this stuff, I just hate to ride through Black communities and see title pawn storefronts and payday loan and check cashing centers on nearly EVERY corner. The reason they don't pop up all over other areas is because its simply not profitable.
We just HAVE to do better.
Excellent article!
Now THIS was a very helpful article. I hope that even more people get to read it.
Excellent Information! Don't forget about Rent-A-Rims! Money wasted....
You forgot ripoff companies like Rent A Center!
Don't forget the casinos in this "recession" the profits they have received is staggering and they are building more!!!
Don't forget the casino's, but of course they prey on everyone.
They left out the biggest one - CHURCH!!!
They 'sell' a product that is 100% intangible, and by the time you find out that it is fake, it's too late (you're already dead)!
They use volunteer labor and are tax free - these other scams have nothing on that!
Can we add cell phone data plans and cable TV to the list?
lol ,yeah the RAC's are really traps, like we need anymore tell-lie-visions in our homes.
And church most def!! I think everything is covered.
well done and timely...maybe theres an opportunity for our banking institutions (meaning our Black banks and finance ppl) to come up with a solution and response to these parasites?
Wow! So much information, yet so valuable and priceless. 2 and 5 got my attention the most-5 for the most part!
When will we as a people learn that the lottery will not always be the answer to our problems? Taxes, risk of being on the receiving end of jealous bystanders, constant living in fear and anxiety 24-7, no comfort of everyday living? And that's just winning the number whatever that number may be!
But for most of us who get little or nothing, at what cost must we abuse our finances like this? Sacrificing our responsibilities trying to get something for nothing. Throwing our money away trying to get over. There is a difference between getting by and getting over to those who are (willfully) ignorant to the matter.
We keep getting suckered in by the scams that keep plaguing our communities-when will it end? And when we let go of our ignorance and get with the programs that can free us from this bondage that holds us down as long as we let it...?
Food 4 thought.
@ Ken, you beat me to the punch. They totally left out tithing. People have been taught to believe God is some kind of extortionist that wants his 'cut', or else. Because people don't study or read for themselves, they don't know that the Bible actually says we are NOT to tithe anymore, but to give freely, maturely, and responsibly.
Knowledge is Power....
In this day and age of internet and web access on phones and tablets, it is simply unacceptable that people don't take a little time and do some research before they jump into ANYTHING concerning money.
You forgot the liquor stores they are placed there to keep you from feeling the full effect of the scams that are being implimented. Or at least to make you numb about the shafting that's taking place.
Based the comments across all the sites this post has popped up on, I think I know what next weeks topic is! Thanks for the feedback everyone! Keep it coming.
I'm glad some people already added church to this list. They demand that you give 10% of your gross income, plus expect money in the collection plate at every service for general and love offering, plus expect you to support every fundraiser and don't be part of the choir since the robes are expensive and there's dues and let's not forget the "roof or building" fundraisers that never result in a repaired roof or improved building.
Another scam is the belief that people need designer labels on their clothing (even the infants), expensive shoes and big expensive cars. Not to mention the "need" to go to the nail and hair salon or barbershop constantly. Let's see... you have no job but you think you need to be dressed up at all times.
To my last Anonymous poster, I think you should read 5 Reasons Black Women Can't Save Money. It's under the Most Popular Blog Posts and I touch on ALL of that! Hairs, nails & designer clothes for kids with no college funds!
Well what has been said today is indicative to how we did in school alot of times. Know that DUMB people will always be and get used. Not saying that it cant happen to someone woth Good Sense. But like Maya Anjalou said " When you Know better you Do better". Alot of blacks feel they know it all and fall prey to these scams. Black people start using Basic Common Sense and most of your problems can be resolved.
Now thats news we can use! I hope BP keeps doing these types of articles, Instead of gossip & other B/S that usually dominates the site.
Useful, Useful, Useful information. Thank you for the insight!
Felicia
Excellent article. Should have also included the "buy here pay here" used car lot ripoff. I believe much of this stems from an "instant gratification" mindset that has permeated our community (myself included at one point in my life)
i know without a state lotto our school system would noy be laying off teachers,and other staff so before u take a swipe at state lotto's look at the facts tunica miss was 1 of the poorest in the country before the casinoes,tenn is not haveing problems with money 2 pay 4 schools cause of the lotto but alabama is big time
This is an excellent article!!!! This type of information should be taught in school as well as educating adults!! Children see what adults do so they already have in their mind that should do the same thing!! what we call generational curse, so the only way to break it is to start opening up the childrens mind early on... Unfortunately, the people who need to read or understand this article will not do it, that's why we need to start with the children!!!!
I loved the artical you hit most of the scams but I think that you left out one very big super scam that black people fall into and that is the rent to own or pay as you go. I know people want nice things but sometimes we have to wait if you can't afford it now put it on lay-a-way or save up for it don't give those rapers your money. I must explan that what you end up paying them for what ever you buy you could have gotten three or more of the samething for that price and by the time you are done paying the Item is old and now you want something else new and you start all over.....pls stop!!!!!!!
Number 5, the one about the lotteries, is part of our magical thinking (some may see the black church as part of that too m=but I am leaving that aside here because it is a complicated issue.) This is about the lottery and the numbers, and the ways we mentally try to inject a little hope to try to escape the grinding financial conditions that would otherwise cause us to lose our minds. I grew up in the South, my father worked all his life in low-payig jobs but he provided for his family. He has passed now and my mother lives on Social Security only, her numbers psychologically are her lifeline. On top fo this, my father wrote numbers for many years, and for years I tried to get him to split his earnings between playing and saving, to no avail. I play Mega Millions and my state lottery as well for $5 or $10 when it gets over $100 million, and the Pick-4 sometimes, but I make comfortably over $100k a year, totally stable, and can afford it. But as much as I understand that people in my community should logically, slowly and methodially do something else with their scarce funds, I understand the thinking that motivates them otherwise.
I think this article should run at least ounce a week.
You really need to run this more often I had to post this on my blog so I can open the eyes of the people I come in contact with. I be following you Patrice!!!!
Beautiful article! The bad part is, no matter how much you try to show folks that these (especially the loans and lottos) are not the way to go, they refuse to hear it.
Blessed Be
Excellent article. I have a friend who rents her furniture smh I will never understand the concept of that. I also think timeshares is a rip off, sorry but no one can convince me to purchase one of those. I have did the payday loans but only once and was sorry I did it. I am glad I found this blog and I have saved the website in my favorites. Yes we have to do better.
5 Things The Black Community Believe Are Scams, BUT Wrong About
1. Education (real learning, not just remembering, reading, math, history, science)
2. Relationships (marriage, not bootycalls, not cheating)
3. Financial Awareness (buy a house before buying a new car)
4. Togetherness (we say brother, sister, claim family and hood, but don't work together much at all)
5. Diversity (not just affirmative action for us, but affirmative action by us, get to know other races)
6. Discipline (not beating our kids, but teaching them focus)
7. Travel (many of us don't go beyond local borders to see what the world has to offer)
8. Listen to Elders (they know more than what we heard them say, we don't listen well)
9. Snitch, Snitch, Snitch (we march against police, but don't say anything about the killers next door)
10. Go Back to Africa (even if just to visit, have you ever seen a country run by blacks for blacks)
Outstanding! It's so easy to fall victim to these scams when you're broke. In addition to these five, you should write a book other ways Black people have fallen behind other groups and what we can do to bounce back. Obama's election was a start. It showed once and for all you can't use your color as a reason to fail or even try. I hope the long term outcome is a real network of successful Black people that really have power and influence, much like the Jew's and Irish. Peace.
Very interesting article. I just knew that the lottery would be on the list. I never used to play but recently have played a few times trying to win the mega million. So much for that. Anywho. The others on the list I can see how that would be a problem for the black community. It just sounds like something that those of the caucasian persuasion were doing and black people starting doing it. Just like bankruptcy. White people were doing it for years and then black people started doing it. People are having hard times these days and creditors are not showing mercy, so people have to find another way. I say, you have to do what you can until your financial portfolio allows you stability.
Interesting article but I think connecting Pay Day loans with Montell Williams is incorrect. At least on the commericals I see him on he is selling a loan-service of sorts but it's not a payday loan (which he makes clear in the advertisment).
For years as a child I grew up seeing my family fall prey to each category listed. As I grew I promised myself that my financial state and desire to gain knowledge about economics would be different. Check out my blog to view some financial information I am sharing. www.cleverlychanging.com
Well either way, I don't believe you should at any time stop calling on the LORD, but the article is definitely on point otherwise, especially the foreclosure process, and I remember our President saying these same words at one time and they ring so true: The reason so many of us have fallen prey to foreclosures is because we did listen to others instead of performing our own search and going out buying homes we couldn't afford in the first place. I contacted Wachovia Bank (now Wells Fargo) several years ago to get pre qualification on a home. I was making $28K/year at the time. I was told that I qualified for a $155K home. This estimate went solely by my income, not taking other bills into consideration, like electricity, water, insurance, taxes, etc. Actually, that part was OUR responsibility, and instead of US taking our other bills into consideration when making a purchase on a home, we went out and bought the maximum amount of what we were told we could afford. I decided to leave that aspect alone until I knew I could afford a home. Needless to say, I have not bought a house yet, but I have seen others had to go through the painful process of giving back a home they knew they couldn't afford in the first place. Just because the bank comes back and tells you that you can afford a $150K house, does not mean you are supposed to go out and buy a $150K house!
I believe we should start with the children. I am so tired of seing little children that know how to shake their butts and curse at the age of two.Then the mother's think this is cute. Teach your kids how to respect their elders and others.Then save for them to go to college rather than trying to get over on everybody. We have to start with the children so that we can stop this cycle of madness.
Financial literacy is available at our fingertips. 1. "Fixing" our individual credit profile. 2. Protecting our Identity. 3. Protecting our family with a will and trust, power of attorney. 4. Using a debit card that reports positive trade lines when used to pay cell phone, cable, utility bills and etc.5. A business of your own that has tremendous tax advantages. The problem is we want something for nothing--it's not going to happen! Making an investment in yourself and "working" at creating income, financial stability, and a future for yourself and your family. It here folks but you have to ACT!
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