“Based on the latest figures from Experian, the average new-car loan interest rate for a buyer with excellent credit was 5.18% for the first quarter of this year. But that average jumps to 15.81% for borrowers with a poor credit history.”
It’s a sad feature of our financial system that those with the least ability to afford something are often forced the pay the most for that very thing. The further up the food chain the less they often pay for food, chains, cars, whatever. They would argue that those with bad credit, with less ability to pay, are more likely to default, which I would assume is true. But let’s say you have an insanely large percentage of defaults – like, 30%, well, then 70% of those same people stuck it out, despite it all, giving you more money than you deserve, maybe?
Of course, they are not in business to be nice, but to make as much money as they possibly can and unfortunately, that is mostly made off those with less money and little power. Rich people have more power, more choices, more everything, and they cannot possibly purchase – even with their fancy yachts and mansions – enough to rival the giant middle to lower classes. So, they developed a system that makes the most money off the giant middle to lower classes.
That’s also why they charge $30 late fees; can you imagine what it actually cost that lender to get a late payment? It’s almost too small to imagine. Now imagine selling something that happens automatically with no human intervention for $30 – constantly – over and over and over, day after day, seven days a week. The late fees department must have one impressive profitability.
But of course, that is not the only way to run your business. You can make money and be good, too. There are lots of good businesses out there making good money by being good, caring about their customers, never overcharging, yet being paid well for what they do. But none of the giant companies – the huge multinational banks and the like – are good. You have to wonder if a business gets to a certain size does it automatically get kind of sick in the head? Does huge always ultimately lead to heartless? And short-sighted modern-day investors don’t help either.
What would that look like? A VISA or Chase Manhattan or USBank that ran a much tighter ship, like their grandpa would have? Make good money, but god dammit, be good! Could that exist in the jungle of the financial sector? When I was young, credit card rates were often 5.99%, 7.99%; I remember when I saw 9.99% for the first time and thought it was the apocalypse. And it does beg the question, why have the average credit card rates gone up across the board so much? To what do they attribute that? Have we all gotten so bad that we must be charged more? And even during COVID when they were borrowing at zero percent, their rates never came down. It should be noted that they borrow at like one or two percent now. And now the only people who could get a rate like those these days are, again, those who don’t need it.
That’s the system. And most people are perfectly fine with it. The wealthy are, of course, and those with less are too busy getting by to think much about it.
Luke Soiseth 