How Credit-Card Debt Can Help the Poor

11 February 2014 - Shaila Dewan, The New York Times

Last October, Jeffrey Shavers, a hotel maintenance worker in Chicago, took out an extremely unusual $300 loan. Shavers might have liked to use the money to visit his daughter, a college student in New Orleans, or to buy his 10-year-old son a new bike. But he couldn’t, because Shavers never actually saw the money. The cash went into a locked savings account that he couldn’t access. “It’s like an abstract $300,” he explained.

But the money wasn’t just sitting there. It was helping him build credit. Shavers began paying back the loan, which was orchestrated by the Local Initiatives Support Corporation, a community-development organization, in $25 monthly installments. And for each $25 that he paid on time, another $25 entered the locked savings account. By the end of a year, the original $300 will be coupled with those payments for about $600 in cash. Read the full story...