Marine Corps News Room

http://www.usmc.mil/marinelink/mcn2000.nsf/main5/66BAAE149CA126198525708C000B76CE?opendocument

Submitted by: Marine Forces Pacific
Story Identification #: 200592922513
Story by Sgt. Danielle M. Bacon

U.S. MARINE CORPS FORCES, PACIFIC, CAMP H. M. SMITH, Hawaii (September 29, 2005) -- It is a week until payday, and Lance Cpl. Joe Schmoe has found himself between a rock and a hard place. He’s spent the last of his money, but hasn’t filled his car up with gas to get back and forth to work.

No need to fear, on fumes he coasts into the local payday advance lender. What he doesn’t know is the $100 he just borrowed is coming at an extremely high price.

If he borrows $100, pays a $10 fee and pays it back in a day, it comes out to a 3,650 % annual rate, according to the APR schedule. The APR schedule calculates rates based on 365 days, amount advanced and total fees.

Most cash advances take the money out of your account on payday. In this case, that would make the $100 loan have a 521.43 % APR over a seven-day period, according to the APR schedule.

“It is quick, easy money. There is no need for credit, because they have your post-dated check,” said Paul Velanger, director of Navy Marine Corps Relief Society, Pearl Harbor. “They know they will get their money.”

The real problem lies beneath the surface.

“They aren’t addressing the real problem when they use payday advances,” said Ed Josiah, a Personal Financial Management Counselor at Marine Corps Base, Hawaii. “They are addressing the symptom.”

Both Velanger and Josiah agree payday advances become a vicious cycle.

“They get the loan, but don’t address what is causing the problem, and then they have to do it all over again next payday,” said Josiah. “They don’t understand the cost of ownership.

“They may think that they can make a $300 car payment, but they don’t think about the costs of owning that car,” he added. “They don’t account for insurance, gas and registration.”

Josiah goes on to explain that Marines should really take a look at what they are spending their money on. He gave percentages to help Marines take a look at their spending.

“At a minimum, they should put 10 percent into savings. Marines shouldn’t spend more than 70 percent on living expenses,” said Josiah. “Living expenses should include food, shelter, transportation, childcare and utilities.”

He then went on to explain what limits Marines should set for their credit spending.

“They shouldn’t spend more that 20 percent on their credit debt. If they are, they should really take a look at what they have,” said Josiah. “Often, they use the credit card the same as a payday advance. They use it to fill the gap.

“Their credit cards end up being a crutch,” He added. “They should really come by my office or seek financial services.”

Free services are afforded at both NMCRS and the Marine Corps Community Services, Personal Financial Management Program.

“We are not here to tell someone how to live,” said Josiah. “We point out areas of concern. We are here to give them advice and the tools necessary to get out of debt. If they need more extensive help, we can refer them to credible agencies.”

Josiah warns Marines thinking about going online to fix their debt.

“They don’t know who is on the other side of the screen. They prey on those who are desperate,” Josiah said.

Velanger added, “Online lenders are the same ball game as payday advance. They average 300 to 500 percent.”

“Whether Marines are in financial trouble or not we encourage them to set a budget,” said Velanger.

He added, “Not only do we offer counseling for service members in time of need, we do budget counseling and also baby budgeting for expecting parents.”

For more information or to sign up for a class call the Navy Marine Corps Relief Society, Pearl Harbor at 423-1314, MCBH at 254-1327 or Personal Financial Management Program at 257-7783