This is a suggestion for the 2nd edition of your book, “Taking the Mystery Out of Money”: include chapters on payday loans and check cashing places. Of course most folks have no clue of the real interest rate that they are paying. I am blue in the face from explaining to people I know that they are really paying over 100% per year in interest.
A friend just rented a commercial building to one of these payday loan places. The owner already has 2 of them in my town and supposedly owns over 50 of them in KY & TN. Obviously he is making a ton of money and lots of folks are having trouble making ends meet. A large garish sign proclaims “Borrrow $200 Pay back $203”. I suspect there are also some “processing fees” as well as punitive late charges. Nonetheless borrowers are encouraged to roll over the loan if they can’t pay it off.
There is also a well known liquor store in my town that cashes checks. I would bet that this owner makes more cashing checks than from selling liquor. They charge “only” 1%!! So you cash a check for $100 & get back $99. Not bad, right? Wrong!! Newbies: If you do not understand that this is over 100% per year, you need to start reading Lonnie’s books. I have been in this store on Fridays & it is scarey. Guys line up, cash their checks, & walk over to the fridge for some suds. They are no better off than they were on Monday morning. Sad.
Dennis
I worked in a liquor store to pay my way through college, and we charged 3% to cash payroll checks and 1% to cash tax refund checks.
The reality is that a certain (small) percentage of checks will be returned NSF. When even one check out of 50 is no good this can wipe out any “profit” by the retailer.
So while I agree it is unwise for the consumer to cash checks in this manner, the stores offer this service as a convenience (and another way to draw people in), but it may not be the profit center you would expect.
JeffB (MI)
I agree with Jeff, the NSF alone would be a pain in the neck and not make such a small spread worth it. This is a loss leader in similar scenario’s I would believe.
The payday advance game is another story entirely and has been outlawed in many states already.
Ryan (NC) ran several of these payday advance places for an owner and saw not only how profitable they were but more importantly how predatory.
Lucky for Ryan he had read Lonnie’s books and met with Scott who encouraged him to start looking at mobile/real estate properties. Ryan became financially independent of that job just months before the state made the payday advance business illegal.
If not for Ryan taking the initiative to educate himself and seek the advice of folks like Scott doing what Ryan wanted to do, he would have been unemployed and looking for work in a business that was no longer even legal.
I don’t think Lonnie needs to change his book. He teaches enough on how to figure out how to make money work for you or work against you. If someone does not take the initiative to educate themselves by seeking his knowledge first then adding a section won’t effect any real change.
Lonnie spends a great deal of time teaching just how compound interest can make you rich or keep you poor forever. The true desire to change is what is necessary for someone to pick up that book. If we simply said, “hey this guy teaches mobile home investing and right here in this section tells you that your payday advance loans and check cashing at the liquor store are bad ideas,” few to none of those folks are going to read it.
The desire for change must come from within to be effective. The action is seeking the knowledge to make that change. If one just keeps cashing their checks or borrowing against them, no action has taken place.
Just my 2 cents.
Tony
I completely agree about the desire to change. It must come from the individual. In addition to passing Lonnie’s book around, I have even given my guys pocket notebooks so that they can track their spending. So far it is an exercise in futility. They just do not want to know or admit where the money goes. That would force them to make painful choices. I pay them on Friday & they are back on Monday morning, broke. Hopefully something will click for them someday. At least now they cash their checks at my bank with no fee.
Dennis