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Saving For a Space Ship

"how Credit-Card Debt Can Help The Poor"

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VI's realising they are running out of debtors ?

IIRC 56% of US people has a damaged credit score

http://www.nytimes.com/2014/02/16/magazine/how-credit-card-debt-can-help-the-poor.html

related article

http://www.vice.com/en_uk/read/living-in-credit-card-debt-makes-you-one-of-them

Last October, Jeffrey Shavers, a hotel maintenance worker in Chicago, took out an extremely unusual $300 loan. Shavers might have liked to use the money to visit his daughter, a college student in New Orleans, or to buy his 10-year-old son a new bike. But he couldn’t, because Shavers never actually saw the money. The cash went into a locked savings account that he couldn’t access. “It’s like an abstract $300,” he explained.

But the money wasn’t just sitting there. It was helping him build credit. Shavers began paying back the loan, which was orchestrated by the Local Initiatives Support Corporation, a community-development organization, in $25 monthly installments. And for each $25 that he paid on time, another $25 entered the locked savings account.

By the end of a year, the original $300 will be coupled with those payments for about $600 in cash. More important than the money itself, however, is the credit score he will have earned if he pays on time: something close to 689, the national average. With a good payment record, he might be able to get something much more concrete: a Visa card....

....Credit is so central to our lives that job applicants can expect to have theirs checked as a proxy for responsibility and trustworthiness.

Life without credit is not only expensive; it’s also potentially ruinous. The most desirable apartments are off-limits, because their landlords run credit checks. Without credit, you have to make large deposits to turn on your electricity or gas or to put your phone bill in someone else’s name. If you want to buy a car, and you have good credit, a $10,000 loan might cost you $1,300 in interest. With bad credit, you’ll pay $7,600. If that car breaks down, a $500 expense might mean a crushing payday loan, or even a lost job. Shavers, who currently makes $16.50 an hour, would like to own a home one day. He knows that he’ll never be able to do it unless he builds his credit first....

.....From a behavioral-economics perspective, borrowing can actually be easier than saving, and not just because it offers instant gratification. While a vow to save $100 a month may quickly go the way of many diets, owing someone else $100 a month is a powerful motivator. Jonathan Morduch, an economist at New York University who studies the spending habits of low-income families, tells the story of Khadeja, a woman from Bangladesh who borrowed money at 36 percent interest to invest in gold jewelry.

She knew she would most likely never be able to save enough to get it, but she would be sure to make her payments to the lender. “Khadeja saw the truth of an odd-sounding paradox,” Morduch and his co-authors wrote in “Portfolios of the Poor: How the World’s Poor Live on $2 a Day.” “If you’re poor, borrowing can be the quickest way to save.”

Khadeja may have paid more to borrow, but she was also buying a service — being forced to pay. Most of us already make constant use of this service, managing our money by borrowing and saving at the same time. In 2000, two business-school professors found that 90 percent of Americans with credit-card debt also had liquid assets, and about a third of them had enough to pay off the entire debt.

But they didn’t. One reason is that if you spend your savings, you’re back to zero quickly. So you may prefer to pay a little more to borrow while keeping something in reserve..........

Edited by Saving For a Space Ship

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VI's realising they are running out of debtors ?

IIRC 56% of US people has a damaged credit score

http://www.nytimes.com/2014/02/16/magazine/how-credit-card-debt-can-help-the-poor.html

related article

http://www.vice.com/en_uk/read/living-in-credit-card-debt-makes-you-one-of-them

Unbelievable. Although, I don't think this chap will be looking to buy a house any time soon!

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So to prove he is a good credit risk the guy takes out a loan he does not need just to pay it back-with interest?

Would that be like taking a mistress but never having sex with her in order to prove your fidelity? It sort of makes sense in a deeply perverse way I suppose. :lol:

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So to prove he is a good credit risk the guy takes out a loan he does not need just to pay it back-with interest

Not quite as stupid as it sounds. I got a credit card simply to get enough of a credit score to get a mobile contract.

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I think credit scores are a good thing. Prove your responsibility before taking out an unpayable loan. Easier said than done when you have 0% interest when paying in full, not sure what other countries are like for that.

What's perverse is needing credit at all to get access to basic things in life.

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What's perverse is needing credit at all to get access to basic things in life.

Indeed, including the basic utility of money itself.

Collectively, we get our medium of exchange, our broad money supply, by borrowing it into existence at interest, that is by bank credit.

As you say, perverse.

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I think credit scores are a good thing. Prove your responsibility before taking out an unpayable loan. Easier said than done when you have 0% interest when paying in full, not sure what other countries are like for that.

What's perverse is needing credit at all to get access to basic things in life.

What is perverse is what the sheeple have been brainwashed into believing are "the basic things in life". The VI`s really fear the masses waking up to the fact that, for most people if they tightened their budgets, they don`t really need credit.

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What is perverse is what the sheeple have been brainwashed into believing are "the basic things in life". The VI`s really fear the masses waking up to the fact that, for most people if they tightened their budgets, they don`t really need credit.

Not really true is it. In a debt based money system no debt no money.

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Unless there is another Great Depression plus no safety net, the masses will spend.

I've read lots of complaints about the feckless that don't save for their retirement and then expect a free ride in their later years. 'Get it, spend it, get more' has its merits. If myself and all the others like me had been as prudent as possible, where would the wealth of those currently prudent come from? Difficult to get wealthy if none of the masses are free spending. I'm fairly prudent now that my earning ability is non existent, must be an age thing but when I was earning, I enjoyed spending it..

All a matter of balance, if we were all either 100% feckless or 100% prudent, imo it would be worse than it is now.

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