Fifth Avenue vs. Main Street Underbanked

UPDATE, 11/20/14: My associate Sabrina Anthony wrote a blog about her millennial son and credit.  With Black Friday and the holiday shopping season upon us, remember the words of Ben Franklin: ‘Rather go to bed without dinner than to rise in debt.”

My childhood was spent in a town where Main Street was the place where my girlfriends and I would spend our weekends.  We would walk up and down the streets browsing and shopping in the local stores.  The shopkeepers knew us by name, as well as our parents and grandparents.  My grandparents set up store charge accounts so that I could shop, when the money in my own savings account was not enough.

As an adult, I still prefer shopping in stores where the proprietors know my name.  As I grew up, I had to establish my own lines of credit.  Being financially responsible was new for me, and the freedom credit cards gave me was life changing.  The little card with my name embossed on the front was a passport to stores that were in other places than my hometown’s Main Street.  Hello , New York City!

To me, the credit cards meant I could go shopping and not have to worry about how much money was in my wallet.  Living in a city known for world class shopping was heaven for me.  The fabulous stores beckoned me every day.  I became someone who had one dollar but would spend two.  A credit card was the best enabler for a spender like me.  I gave no thought to how the bills would be paid when they came in.  I was completely shocked when the first bills arrived and I had to struggle to pay them off.  Over time, I have been able to recover from my lack of financial responsibility.

Unfortunately, not everyone is as lucky as I am when it comes to credit.  The current state of the economy for the last four years has made it especially difficult for most of the population to pay off their existing credit debts or obtain new lines of credit. Although the average has decreased from $7,694 to $5,403 in the last 3 years, the average national credit score has decreased almost 25 points since August 2009 from 675 to 651.

Approximately 46% of consumers have little or no credit.  This high percentage has resulted in a population of 21 million US households that are .  Underbanked consumers have difficulty obtaining , , or credit cards and have limited access to traditional .  During the past few years, traditional banking institutions have increased their requirements for extending credit.  As a result, the underbanked households are lacking in options for obtaining credit.  This in turn has created an increase in alternative financial services such as subprime loans, prepaid credit cards, and payday loans.

may be on the upswing, but many consumers continue to struggle.  I can empathize with individuals who have maxed out their credit and struggle to pay off their debts.  I remember how hard it was for me to clean up my credit and improve my credit score, as a result of my spending habits from when I was younger.  Shopping, on Main Street or Fifth Avenue, should be a worry free experience, not the stressful time it can be for those who have poor credit and debt.    Benjamin Franklin said “Rather go to bed without dinner than to rise in debt.”  Unfortunately, too many people do both today.


Adrea Rubin