Loan Pushers

I was out for a walk at lunchtime one day and saw a huge billboard for a payday loan company. The huge font read

$100 LOAN FOR $1

Presumably this means that you’d pay only $1 in interest on a loan of $100. This is cheaper than the usual rates for payday loans, so I suspected a catch. Then I noticed a smudge to the right of the large font. I had to cross the street to read the fine print written sideways:

ON FIRST LOAN

The font for the fine print was so much smaller that all three words together sideways were the same height as each large character in the main message.

So, the offer is a lower cost entry to a cycle of debt and despair. It all reminds me of the techniques used by drug pushers when I was young. The first joint or little baggy is free, but you’ll have to pay when you come back for more.

Comments

  1. Stephen @ How To Save MoneyAugust 13, 2014 at 9:13 AM

    Yes, that's exactly what it sounds like and is a very common marketing strategy even for "reputable" businesses. Hook the customer with a cheap offer and then keep raising the rates until you bleed them dry. Rogers and Bell come to mind :)

    ReplyDelete
    Replies
    1. Michael JamesAugust 13, 2014 at 11:22 AM

      @Stephen: You're right that this strategy is very common. I guess it's the nature of the product that determines how we view new customer discounts.

      Delete
  2. Big Undercover Cajun ManAugust 13, 2014 at 11:55 AM

    "C'mon everybody is doing it" is what a reliable source has leaked to me as their next marketing slogan.

    ReplyDelete
    Replies
    1. Michael JamesAugust 13, 2014 at 12:01 PM

      @Big Cajun Man: Subtler variants of that message seem to be very effective, unfortunately.

      Delete
  3. GregAugust 13, 2014 at 2:01 PM

    Usually it's $20 for $200 and I keep on seeing a cash money ad that has a special deal of $20 for $300 which is "half off". I guess if you can see how that is half off you can also see that payday loans are a good deal.

    ReplyDelete
    Replies
    1. Michael JamesAugust 13, 2014 at 2:44 PM

      @Greg: Funny. Maybe go for $50 on $300 and call it half off?

      Delete

Post a Comment

Popular posts from this blog

Short Takes: InvestorLine’s HISAs, 24-Hour Trading, and more

I recently moved some cash into BMO InvestorLine’s high-interest savings accounts (HISAs) that are structured as mutual funds.  Their designations are BMT104, BMT109, and BMT114, and they purportedly pay 4.35% annual interest (which they can change whenever they like).  However, the way they report the monthly interest payments is so baffling that I wasn’t able to sort it out in my first 15 minutes of trying.  A further complication is the following text in the HISA description: “The Bank may pay, monthly or quarterly, compensation to your Dealer at an annual rate of up to 0.25% of the daily closing balance in the BMO HISA.”  I couldn’t find any evidence of such a charge, but I haven’t been invested for a full quarter, and I can’t yet say that such a charge isn’t buried somehow in the confusing reporting.  I have more digging to do before I can recommend these HISAs. Here are some short takes and some weekend reading: Preet Banerjee explains the dangers of Robi...
Read more

My Asset Allocation

I’ve resisted discussing my asset allocation for some time, but now is finally the time to describe it and the reasons behind it. I’m not holding it out as a model portfolio; I believe it’s suitable for me and not necessarily anyone else. With that warning, enjoy the discussion and feel free to ask questions or take some pot-shots. The main reason why I haven’t discussed my asset allocation in detail before now is that I don’t want readers to treat it like a model portfolio and follow it blindly. Everyone’s situation is different. The need for variation in asset allocation from one investor to the next usually isn’t huge, but there is no one-size-fits-all portfolio. A secondary reason for keeping my asset allocation to myself is that I can’t be sure I’ll never change it. For example, I recently made the minor change of switching from an ETF of small-cap stocks to an ETF of small-cap value stocks . I don’t have any plans to change my current allocation, but I may think differe...
Read more

Updated Currency Exchange Method at BMO InvestorLine

There is now a more recent update of the method I use for exchanging currency at BMO OnvestorLine . I recently changed the procedure I use to convert large sums between Canadian and U.S. dollars at BMO InvestorLine. The method I use saves a lot of money compared to using the InvestorLine foreign exchange system. The latest change I made eliminated an annoying interest charge that I had to ask to be reversed. Most people don’t realize how expensive it can be to exchange currency. The extra charge banks and brokerages add gets hidden in the exchange rate. To see this extra charge, start by taking a sum in Canadian dollars, say C$10,000, and finding out how many U.S. dollars you can get. Then see what this U.S. amount would get going back to Canadian dollars. Many people might guess they’d get their original C$10,000 back, but they’d be wrong. In a recent test I did at BMO InvestorLine, I’d get back C$9754, for a loss of C$246 in two currency exchanges. That’s $123 per excha...
Read more

Archive

Show more