Locked into poverty

"It's expensive to be poor".

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Locked into poverty

#1  Postby Mike_L » Apr 10, 2013 7:42 pm

It's Expensive To Be Poor

By Robert Nielsen

Being poor is expensive. Not only do you have less money to get by with but everything also costs more. The secret to getting rich is in economies of scale and bulk buying, something the poor simply can’t afford. As they’re stuck trying to make ends meet day-to-day, they can’t invest in the future and so are stuck with false economies that cost them more in the long run. This is the source of the counter-intuitive saying that “You have to be rich to be poor.”

The poor suffer from their exclusion from banks. Their lack of savings and poorer credit history means they have to pay higher interest and often are forced to resort to loan sharks. Instead of buying something outright they instead have to use hire purchase. It was reported that a $200 rent-to-own TV in Wisconsin costs $700 when interest is charged. They can be charged exorbitant rates and end up paying the loan several times over. Without a bank account they cannot cash paychecks but instead have to use shops who charge a 10% commission. These charges are known as a “Ghetto Tax” and if they were removed it would put an additional $6.5 billion dollars into the hands of the poorest Americans.

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Re: Locked into poverty

#2  Postby I'm With Stupid » Apr 10, 2013 8:11 pm

I've read this before, which makes me think someone's already posted it. Dunno though.

But yeah, it's expensive to be poor and it's even more expensive to be single and poor. I believe you also pay more for electricity (in the UK) if you're on one of those pre-pay meters, which are exclusively given to poorer people.

I used to work in an electronics shop named after a famous Indian dish, and one of my jobs was to bring people through the credit agreement. It was "interest free" but deliberately set up to trick people. It was interest free for a year, but the payments were set up to repay over a period of 4 years, and if you wanted to avoid the 30% APR (which almost triples the price of the item over 4 years), you had to pay a lump sum off at the end of the first year (75% of the value of the item). Needless to say, more people failed to do this than managed it. In fact, I was told that the success rate is actually less than 10% (I don't know how reliable that is). But it would be very easy to just blame the predatory banking sector. But it's also worth mentioning that a large number of these purchases were for non-essential items, with widescreen TVs and games consoles being the most common items.
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Re: Locked into poverty

#3  Postby natselrox » Apr 10, 2013 8:27 pm

I've often thought about this and one thing that always seemed to bother me was that the buffers against economic disparity in the current system also come at a cost with those disparities inherent to them so you never really give the disdvantaged a chance to catch up. This is true of most disparities in society (sexism, racism, etc.) but it's particularly evident in the economic system.

I'm no expert though but I have a feeling that this current economic system is kinda broke and the sooner it goes the better for humankind.
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