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Originally Posted by Sean Clayden
Typical to the UK. Why is it that banks charge higher interest to those that are financially at risk, surely those that are financially viable should pay higher rates, lower income earners would benefit from lower rates.  |
Typical in the USA too. A "payday loan" (don't know if these exist in the UK) is a good example: Customer, usually lower income and with little or no credit history, borrows $200, for example, to get them to their next payday. This $200 typically costs the customer $40 for the two weeks--an interest rate of over 500% APR! Credit-cards geared to the lower income brackets also typically have much higher interest rates, say 25-30% as opposed to 8-9%. Call it capitalism, or maybe plain old extortion...lenders that serve the lower-income market know their customers have nowhere else to turn.