The Advantage Advisor

  A history of debt in America

  Banks and credit unions

  Education classes with Advantage

 

 

The concept of debt is as old as time itself. People have always practiced the ideals of lending and borrowing. While debt in America started with the original colonies, the modern forms of debt we know started in the 19th century.

 

Store accounts were a concept brought to America from England in the 18th century. People would purchase goods at their local general store, and the clerk would record the purchases in a ledger. On a given day, or when the buyer had the money, he would return to the store to pay his bill. Generally no interest or fees were associated with this form of credit. This laid the foundation for the store credit cards we use today. 

 

The first credit reporting agency was founded in 1841 by relatives of Benjamin Franklin. These early reports did not rely on financial information, but on moral judgments. The reports were catered to businessmen, and in some cases simply stated whether or not to loan money to a particular person. Some included statements about a person’s happiness and popularity instead of their ability to pay. 

 

Borrowing money to purchase a home is also a very old concept. Some of the first mortgage terms on record come from the 1800s and clearly state that at least a 30 percent down payment was mandatory. The remaining balance was paid off at a 5 to 6 percent interest rate, usually for a period of five years.

 

One of the first organizations to help people with mortgages was the Building and Loan Associations.  These organizations started in the 1830s, and just like in “It’s a Wonderful Life,” people bought shares in the organization. The shares were paid for as a form of a mortgage. These organizations helped many people of lower income levels afford homes.

 

Payday loans started in the very early 1900s in New York City. Borrowers had to promise to hand over future wages to pay the loans back. In some cases, the lenders also got the borrower’s employer to promise to pay also. Interest rates on these loans were generally high, just as they are today. Many bosses forbid their employees from taking these types of loans, as the company itself was also responsible for repayment.

 

In 1909, the price of a used car was so high that no one but the wealthy could afford it. By 1916, the concept of sale on time was born. This new form of credit was a way for people to afford items they couldn’t pay for in full. It stretched the price of a car out over months or years. With some companies, the buyer got the car right up front. With others, the buyer had to wait until the balance was paid off. 

 

Credit cards were first issued in 1950 to business men traveling across the country. The cardboard card was accepted at 27 restaurants and was considered to be a way for the salesman to buy a meal while on the road.

 

It wasn’t until the mid 1950s that the first plastic card was born.  American Express was the first and was soon followed by Bank of America. In 1967, the City Bank Of New York issued the “everything card,” a product eventually called MasterCard.

The way credit cards work hasn’t changed much since then. What began as a convenience for a few hundred business men has turned into a trillion dollar industry today.

 

We know what can happen with unpaid debts today. In the 1800s, it was possible to go to debtors’ prison for unpaid debts. The debt didn’t even have to be from a business or an official loan, it could have also been something as simple as a loan from a friend or a local store.

 

Today, while you can still go to jail for fraud or other money related offenses, there are no debtors’ prisons within the United States. Some states have added amendments to their constitutions outlawing jail time for failure to pay debt.

 

Q: Do you offer education programs or classes?

 

A: ACCS offers a variety of money and credit management programs to our clients and to the community. 

 

“Personal Financial Management 101” is offered free of charge to our clients and to the community at one of 10 locations throughout Pennsylvania.  The classes are pre-scheduled by ACCS.

 

Participants learn the basics of budgeting, setting financial goals, the importance of tracking daily expenses, and the wise use of credit.  If you’re interested in attending a class, call 888-511-2227, Ext. 145 for more information.

 

A wealth of financial literacy information can also be found on our website at www.advantageccs.org. Topics include budgeting, smart shopping tips, credit reports and credit scores. 

 

In our Pennsylvania service area, we provide a wide variety of presentations to community groups, organizations, and in the workplace.

 

 

There are two types of inquires that can be reflected on your credit report.

 

Hard inquiries are made when you apply for credit or, possibly, if you open a deposit account with a bank. One hard inquiry will likely cause a small decrease in your credit score. The inquiry will only affect your score for one year, though it will remain on your credit report for two years.

 

Soft inquiries are inquiries made by you (such as viewing your credit report) or by your current creditors who are just “checking in” on your current credit situation. They are visible only to you when you check your credit report, and they do not have any effect on your credit score.

 

 Banks and Credit Unions

What’s the difference between credit unions and banks? Both offer checking and savings accounts, but how each provides their service can vary.

 

Banks are for-profit institutions. Fees are attached to most products and usually, there is a minimum balance required for most accounts. Credit unions are not-for-profit institutions and are designed to provide an affordable service to members.

 

Who can be a member of a credit union? Basically, anyone can join. Credit unions are usually associated with employers, neighborhoods, associations or even churches. Nowadays, most credit unions offer service to anyone in the community. Fees are usually low or non existent and in comparison to banks, interest rates on loans are usually lower too. In most cases, credit union fees for overdrawing an account are also lower than banks.

 

Typically, credit unions offer fewer products than banks. Banks usually have a wide variety of financial services and loans available to customers. Some credit unions don’t have their own ATM cards. The ones that do, usually have a network of ATMs available for its members to use.

 

Be aware that some banks may not let you open up a new account if you have a history of bounced checks or overdrawn accounts.

 

When you join a credit union, some require you to open both a savings account and a checking account.

 

Both credit unions and banks are federally insured. Banks are insured by the Federal Deposit Insurance Corporation, while credit unions are insured by the National Credit Union Administration.

 

It’s important to compare both services to decide which option is the best way to do your banking.

 

Save money on your Labor Day gathering.

 

The summer is coming to a close and there’s a good chance you’ve already spent plenty of money on Memorial Day, July 4, graduation parties and family reunions. Keep your Labor Day costs low by:

 

Have everyone bring a dish.

 

 

For information about Pennsylvania’s credit unions, visit:

 

To find a credit union near you anywhere in the country, visit:

For confidential credit counseling, get started
with our free no-obligation online intake form.

Click to Get Started>>

Get Free Immediate
Debt Counseling!

· Avoid Bankruptcy · Reduce High   Interest Rates · Stop Harassing   Creditor Calls

Call 866-699-2227 >>