our current thoughts

Would you stay at a hotel that cost $36,000 per year?  Would you rent a DVD for $600 per year?  Sounds outrageous, right?  Actually, those prices are just annualized rates for a $100/night hotel and a $5 DVD rental.  You’d never stay in a hotel for a whole year and you wouldn’t keep a DVD rental for 365 days, so the annualized price doesn’t make sense.

Which brings us to the number one source of confusion and criticism about emergency cash loans — Annual Percentage Rate, also known as APR.  Millions of Americans use emergency cash loans to make ends meet when an unexpected expense occurs.  They typically borrow a few hundred dollars and pay it back over a few weeks.  Emergency cash lenders might charge a fee of 10% to 20%, which is almost always less costly than other options such as bank overdraft protection and paying bills late.  However, lenders are required to disclose the fee on an annualized basis, resulting in eye-popping APR’s of 300% or more (remember the $30,000 hotel room?).

Make no mistake about it, emergency cash loans are an expensive form of credit (that’s why they’re called *emergency* loans) but they meet a real need.  The high APR’s associated with these loans have become a source of confusion for customers and a lightning rod for critics, which distracts from the real issue:  Ensuring access to credit for those that need it most.

It’s important to note that we understand and respect the intent behind APR disclosures – our legislators and regulators want to protect consumers from making poor financial choices.  But APR may not be the right way to do it.

Arjan Schutte, an investment manager that focuses on the needs of underbanked consumers, proposes a new way to measure the quality of short term credit products in his blog.  It’s worth the read.

Recently, Think Finance had CEO Ken Rees share our story with reporters.  We were very excited to talk about our vision of developing innovative financial services products to meet the needs of a growing group of Americans being left behind by the traditional banking AND even more excited to see how much that story resonated the media we spoke with.  Check out a story published by one of our local publications, the Fort Worth Business Press , and learn more about the impressive things happening at Think Finance!

Prepaid debit cards have become a hot topic in recent months, making headlines as new products went to market and more and more people saw their benefits.  According to the Network Branded Prepaid Card Association, the amount loaded on to prepaid cards has doubled each of the past four years and this trend is expected to continue.

Why are millions of consumers choosing prepaid debit cards instead of traditional checking accounts?

At Think Finance, we believe the growth of the prepaid debit card market is part of a larger consumer trend.  Traditional banking products simply don’t work for a growing portion of hard working Americans and they’re looking for alternatives.  Consumers have grown tired of overdraft charges and other hidden or unexpected fees.  Savings programs pay anemic interest rates.  And credit isn’t available to those who need it most.

As a result, millions of Americans have assembled their own patchwork financial solution, using products like prepaid debit cards, payday loans, and check cashing.  But these products are costly and often inconvenient to use.

Our mission at Think Finance is to provide all of the financial tools an unbanked, underbanked, or unhappily banked consumer might need in one simple, low-cost, transparent solution.  In the next few months, we’ll be announcing products that combine a low-cost prepaid debit card with affordable credit, innovative savings programs, credit-building tools, and financial literacy training.  We’ve been testing some of these features for the past year and customer feedback has been overwhelmingly positive.  Stay tuned for more!