Monday, July 31, 2006
The toll on the poor
Here are some factoids I gleaned from this month's issue of Mother Jones magazine. If you're falling into one or more of these traps, you need to make some changes:
* Among households worth less than $13,500, their average net worth in 2001 was $0. By 2004, it was down to –$1,400.
Among the working poor, 13% of income is spent on commuting if public transportation is used, 21% if a private vehicle is used.
Initially an anti-redlining effort, sub-prime mortgages have risen tenfold since 1994.
Today, 1 in 4 sub-prime lenders are predatory, charging recipients 7% in up-front fees. Conventional or “prime” mortgage users are charged only 1%.
2% of prime mortgages carry prepayment penalties. 80% of sub-prime ones do.
13% of U.S. households don’t have a checking account. 1 in 10 don’t have any form of bank account.
In Chicago’s poorest areas, the ratio of check-cashing outlets to banks is 10-to-1.
Check-cashing fees for a worker who brings home $18,000 a year add up to about $450 —that’s 2.5% spent just to access income.
Nationwide, the number of payday lending outlets has risen 11,000% since 1990.
The average annual interest rate on a payday loan is more than 400%, costing borrowers $3.4 billion a year.
Credit card late fees are 194% higher than in 1994.
The average credit card balance for households earning less than $35,000 is $4,000.
At 11.5% apr, making the standard minimum payment of 2% per month, it takes 13 years to pay off a $4,000 balance.
In 2004, 7 million working poor families spent $900 million on tax prep and check-cashing fees to get their refunds sooner.
Average amount of time by which they sped up their refunds: 2 weeks.
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* Among households worth less than $13,500, their average net worth in 2001 was $0. By 2004, it was down to –$1,400.
Among the working poor, 13% of income is spent on commuting if public transportation is used, 21% if a private vehicle is used.
Initially an anti-redlining effort, sub-prime mortgages have risen tenfold since 1994.
Today, 1 in 4 sub-prime lenders are predatory, charging recipients 7% in up-front fees. Conventional or “prime” mortgage users are charged only 1%.
2% of prime mortgages carry prepayment penalties. 80% of sub-prime ones do.
13% of U.S. households don’t have a checking account. 1 in 10 don’t have any form of bank account.
In Chicago’s poorest areas, the ratio of check-cashing outlets to banks is 10-to-1.
Check-cashing fees for a worker who brings home $18,000 a year add up to about $450 —that’s 2.5% spent just to access income.
Nationwide, the number of payday lending outlets has risen 11,000% since 1990.
The average annual interest rate on a payday loan is more than 400%, costing borrowers $3.4 billion a year.
Credit card late fees are 194% higher than in 1994.
The average credit card balance for households earning less than $35,000 is $4,000.
At 11.5% apr, making the standard minimum payment of 2% per month, it takes 13 years to pay off a $4,000 balance.
In 2004, 7 million working poor families spent $900 million on tax prep and check-cashing fees to get their refunds sooner.
Average amount of time by which they sped up their refunds: 2 weeks.
