The Cycle of Financial Struggle

In the United States, it is expensive to struggle with finances, and poverty keeps people trapped in a cycle. Those who do not have access to a lot of money are forced to pay many penalties, including a bank fee for keeping less than a certain amount in a checking account. And minimum balances are just the beginning - people experiencing poverty are also faced with higher interest rates, and are the victim of predatory lending practices which include many rent-to-own type of offers. Living paycheck to paycheck is often the start of the cycle, but with wages standing still in a world of skyrocketing inflation, it can feel like it’s next to impossible to get out of the perpetual trap.

Sometimes people depend on tips to help get by financially, or their work hours fluctuate, so it can be hard to balance the constant payment of bills and avoid the overdraft of a bank account; when this happens, many people get so frustrated by the fees that are charged in order to bring the account to good standing that they instead opt to just close down the account. Then they are forced to cash employment checks at the local check-cashing establishment which takes a hefty percentage for their cut. These types of businesses are predominantly found in low-income neighborhoods and are literally banking on people who are in a financial struggle.

Buy-here-pay-her car dealerships are also taking advantage of people who are suffering in poverty. Many people have no credit, or bad credit, and find it is difficult to secure a car loan. But a car is necessary for most people, especially in low-public transportation areas, in order to get to work or school. So those who are struggling financially see the “deals” offered at predatory car lots that offer a loan to everyone regardless of financial hardship. Unfortunately, the buyer ends up paying amounts well over twenty five percent in interest making the final cost of the car well over blue book value. In some instances, the dealer won’t even accept cash, and will only agree to large payments made over several years which can make the buyer pay triple, even quadruple for a car that’s not worth it and ends up breaking down while they are still on the hook for the loan.

Often times, impoverished citizens find it difficult to make ends meet, so they must rely on a credit card in the case of falling short on the bills, or for an emergency. However, because they have a lower income than average, and possibly a subpar credit score, the credit cards they are using have a higher interest rate which makes it harder to pay off the balance. And when those who are struggling financially need things like appliances, or furniture, they often turn to rent-to-own centers, who also charge ridiculously high fees and interest, so the item that is purchased ends up costing hundreds to thousands of dollars more than what it is worth. The alternative is to take in used items which run the risk of being roach or bedbug infested; this very serious pest problem can run into the thousands to eradicate.

These are just a few examples of how people get trapped in a cycle and find it difficult to get ahead. It is not as simple as working harder or moving to a new location, as the fees constantly add up just keeping people below the line of success. The answer is to educate everyone in the area of financial literacy and stop allowing corporations to punish those who are in poverty.