Friday, June 6, 2014

Dave Ramsey on the Truth of Cash Advances

I believe Christians should practice and support policies that benefit the poor and not take advantage of them. It is for this reason I do not recommend anyone doing business with or support cash advance businesses. Although I hesitate in saying one should petition the government to shut down all such businesses, I am surprised by how Christians rarely address the issue (and I am guilty of this).

In his book Dave Ramsey's Complete Guide to Money: The Handbook of Financial Peace University, Dave Ramsey advices his readers to avoid them. He writes:
Myth: Cash advance, rent-to-own, title pawning, and tote-the-note car lots are needed services for lower-income people to get ahead. 

Truth: These are horrible, greedy ripoffs that aren’t needed and benefit no one but the owners of these companies. 

You can usually judge the economics of a neighborhood by the number of cash advance and rent-to-own businesses you see up and down the thoroughfares. If you’re in a wealthy part of town, you really won’t see any of these places. If you’re in a poor part of town, you’ll probably see them scattered everywhere, even next door and across the street from each other. That should be your first sign that these are horrible businesses designed to keep people broke.

You might think that these businesses aren’t in nice neighborhoods because “all those rich people” don’t need their “services.” Bull! The truth is, wealthy people wouldn’t dream of using such a ripoff; it’s not because they’re rich; it’s why they’re rich. Wealthy people don’t throw their money away. Cash advance is a poor man’s activity. I don’t want to be poor! If I want to be rich, I’m going to do what rich people do. If I want to stay broke, I’ll do what broke people do. It’s almost just that simple. 

The “service fee” on that payday loan may not seem like that big a deal—until you see it as an annual rate. Would you defend a credit card company with an APR of 800 percent, or even up to 1,800 percent? Heck no! Then stop telling me a payday loan is a good idea. It’s predatory lending at its worst, and it is one big reason why broke people get stuck in a downward spiral of uncontrollable debt. This is trash, plain and simple. (83-84)
I agree. Though Ramsey focuses on the practical side of it (their interests are through the roof), it is important to emphasize the predatory nature of the businesses. It preys on the poor and takes advantage of them. That is something Christians should not support.
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