"Stuntin like my daddy" was the first song on the album, "Like Father, Like Son," issued by Lil Wayne and Birdman in 2006. "Stuntin" is a hip hop term synonymous with "flossing," blinging," and "balling." It means that you’ve engaged in excessive spending to ensure that you have the finest of everything and are even willing to live at the edge of your means in order to present appropriate status symbols to the world. Anyone who follows hip hop knows that you should never take financial advice from a rapper. In light of the recent passing of their father, I sincerely hope that the children of Michael Jackson didn’t hear the Lil Wayne song, since their daddy’s financial "stuntin" before his death has left the children with a conflicted economic legacy.
On one hand, we shouldn’t feel sorry for Michael Jackson’s kids, at least not financially. Their father’s amazing talent gives them a brand that is literally worth well over a billion dollars in future royalties and licensing fees. Michael Jackson may have died physically. But financially, he is still a viable and overwhelmingly powerful corporate entity.
Michael Jackson is not dead. No, he’s not on a deserted island chilling with Tupac and Elvis (who some believe faked their deaths), but he is certainly alive in corporate and social spirit, impacting millions of people.
Michael will make 1000 times more money in death than most people make when they are alive. But similar to when he was alive, massive amounts of cash will have to be generated in order to counter the enormous debt that Michael created while he was doing his thing.
Reports have stated Michael Jackson’s debt to be as high as half a billion dollars, enough to make some major corporations blush. What’s worse is that this debt was not created via a series of sound financial investments: it was conceived by building personal amusement parks, buying rare monkey statues, and rocking his way from one expensive store to the other.
Michael’s spending became his addiction. Financial needs could have been what led to him agreeing to do 50 concerts in London this year (a tour he was preparing for just before his death), when he may have not been able to handle one. It was starting to get sad watching Michael perform, similar to watching Muhammad Ali after he’d spent 10 years dealing with Don King. While the 50-year old Michael Jackson may have given a great performance, it would probably be something less than what we’ve come to expect.
by Dr. Boyce Watkins, Finance Professor Syracuse University
I have a friend who broke both of his legs climbing a dangerous mountain in Southeast Asia. This friend has nearly died 8 times, been chased by bears, and has had food poisoning too many times to count. After his latest injury, we presumed that he would understand that taking such risk simply doesn’t pay. But he rebuffed our intervention, stating that the risk is what makes his life worth living. My friend seems to believe that pursuing and living the dream might be worth enduring the occasional nightmare.
The current financial crisis is certainly the worst of economic nightmares. Job losses have been enormous and the stock market has shrunk faster than Lindsay Lohan’s dress size. A report released by the Bureau of Labor Statistics last week reported that in May jobless rates were higher in all 50 states and in the District of Columbiathan they were a year ago.
The Black community has had a double dose of economic drama, as our unemployment rate is nearly double that of White Americans, standing at 14.9% according to the latest figures from the Bureau of Labor Statistics. Black urban centers such as Detroit have been hit especially hard.
www.yourblackpresident.blogspot.com
From our Black Money Blog. For more black wealth advice, please click here.
They grew up during a time of cultural change, and now are being forced to redefine retirement at midlife.
The 77 million Americans in the Baby Boom generation face an economic storm: The Wall Street meltdown trampled their retirement nest eggs more than any other group. After losing jobs during what they thought would be some of their peak earning years, many are struggling to get back into the workforce. Health care costs are rising, and declining home values mean they might not be able to count on home equity to guarantee an easier retirement.
SAVE EARLY: Tips for building a solid retirement plan
"This generation will be sobered by their experience," says John Coyne, president of Brinker Capital, an investment management firm. "They may not have as extravagant a vision of retirement as they did last July."
The confluence of events has an even bigger impact on a subset of the Baby Boomers known to analysts as the Sandwich Generation. Those Boomers are putting money toward their children’s college education and their aging parents’ long-term care, as well as their own retirement savings.
Kobe Bryant started his career with the LA Lakers as a tremendous athlete with a valuable brand. His stock rose like an elevator, as Madison Avenue loved him as much as Laker fans. Then life took a strange twist. First, there was the nasty departure of Shaquille O’neal, which instantly reduced Kobe and the Lakers to "also-rans" in the NBA playoffs. A man who was used to winning championships was reduced to simply playing for pay.
Off the court, things got even worse. In 2003, Kobe was accused of a horrifically embarrassing sexual assault, a case that was later dropped. But even though the charges were dropped, the case still had a lasting impact on Bryant’s reputation: Sponsors ran the other way and everyone wondered if Kobe might turn into another "coulda, woulda, shoulda" black athlete.
But he persisted. The Lakers got a little bit better every year, with that improvement culminating in what some believe to be Kobe’s first "real championship" this year; a title without the boost of a dominant big man. For the first time, the Lakers are champions under Kobe’s watch. He has proven that he is more than a replica of Anfernee Hardaway.
by Dr. Boyce Watkins, Finance Professor at Syracuse University
I hate to be the bearer of bad news. But then again, it must not bother me very much, since I am going to give you a big pile of bad news right now. Given that I earned a Masters Degree in the "morbid science" of statistics, I figured I would start the day by fulfilling my occupational expectation.
The first piece of bad news is that you are going to die. One day, your heart will stop beating and the 2.5 billion breaths you’ll take during your lifetime will come to an end. Hopefully, it won’t be painful, but I can’t guarantee that. The truth is, however, that death might not be the worst part of it all.
The toughest news is that before you die, you are likely going to experience a long, slow period of physical and psychological decline called "old age". In conjunction with this decline, you are going to see your financial resources dwindle as quickly as the muscles in your body. Not only will the scale of your resources decline, but your expenses will likely mount as you go to one doctor’s visit after another, all with the hope of delaying the inevitable. That period of life is called "retirement", and most Americans are not financially prepared for it.
Now that you are sufficiently depressed (there’s no point in lying to you, I’m not very good at that), I will give you some facts to chew on. I also hope that in light of these realities, you will engage in something that the rest of America is not doing: preparing for retirement. While retirement planning has always been important in the past, it has never been more important than it is for you right now. The Perfect Economic Storm is coming, one in which all the scary clouds merge together into one big ball of fiscal devastation that can only be created by God himself. When your financial meteorologist (me) gives you that information, it’s your decision to get your family prepared. Let’s break down the components of the storm, shall we?
NEW YORK (CNNMoney.com) — As Detroit home prices in Detroit crash, sales are heating up. But with all of the plant closings and layoffs, who’s buying? Investors — some of whom are snapping up five and 10 houses at a time.
"I have investors from all over the country and the world," said Jeremy Burgess, co-founder of Urban Detroit Wholesalers, which buys undervalued homes to rehab and rent or to sell to other investors. "One Lithuanian woman just bought a second house."
"Most of the local investors are out of money," added Mike Shannon, who specializes in Detroit foreclosures and has clients from New Zealand, Australia, England and other places.
Recently a Californian purchased 178 properties, mostly one at a time, and most for under $10,000. Another has purchased six Detroit properties since September and hopes to begin buying five a month.
Click to read more on the African American Money Blog.
Dr Boyce Watkins – Syracuse University: Black Scholars Coalition
I recall giving a speech at a university in Upstate New York. We were talking about wealth building for the Black community and how Black folks can remove themselves from the underbelly of American capitalism. I’d heard this school had a reputation for strong liberalism and I was looking forward to addressing the audience. A young white female in the back of the room raised her hand to ask me a question. She said "How can you support a system that enslaves people?"
The woman was clearly offended by my mere presence as a financial expert and apparent supporter of capitalism. I could immediately tell, that no matter what my answer was, she was going to hate me and wish death upon my children. She didn’t realize that I am not just a Finance Professor, but also a closet socialist in many contexts. While I am not one who wants to live in a socialist society, I do understand that capitalism and socialism must balance one another in any society that alleges to embrace human compassion.
Black finance expert Ryan Mack brings us advice from a place of real heart to help hard-working Americans deal with the mortgage mess. With his warm brand of personal finance advice, Mack’s strongest words to the community are: "If you are having problems paying your mortgage DO NOT WALK AWAY FROM YOUR HOME!" In part one of our two-part interview, learn more about how we got into this housing crisis, how it has affected the general economy and what you should do now to protect your home.
How did you become a finance expert? What inspired you to pursue this goal?
When I was on Wall Street making great money I felt empty, because I was not an effective contributor to my community. I knew that finance was my passion, but I also knew that sitting in a cubicle making money only for the sake of self-empowerment was not my purpose.
Like too many families in America, many people in my family were not financially literate. My passion was to change that. In addition, I was always getting asked personal finance questions from peers who knew I was a stock trader. But trading is different from personal finance. To address these questions, I began to study personal finance and started a Yahoo group called MakingMoneyWork, which provided tips and strategies to over 200 members through weekly newsletters.
Tavis Smiley needs to have a conversation with one of his primary sponsors, Wells Fargo. This week, it was announced that Wells Fargo is being sued by the city of Baltimore for egregiously racist predatory lending practices in the black community. The company has been accused by some former loan officers of targeting subprime, low quality loans to black neighborhoods, leading to a dramatic economic collapse for the black community of Baltimore.
The statistical evidence is daunting. Half of all the properties foreclosed by Wells Fargo are vacant and 71% of those properties are in black neighborhoods. Wells Fargo’s African American borrowers with incomes greater than $68,000 per year were 8 times more likely to hold subprime loans than white borrowers with the same income.
Dr. Christopher Richardson
Dr. Christopher Richardson, one of the world’s leading experts on predatory lending and banking, comments on a recent report that Wells Fargo, one of the sponsors of the State of the Black Union event held every year, is being sued by several government agencies due to accusations of financially exploiting and deliberately misleading the Black community. Dr. Richardson’s comments are below:
Polonius wouldnt have gotten very far in America today. He’s the Shakespeare character in Hamlet who warned, neither a borrower, nor a lender be.
Modern society, as we know all too well, is overrun with both borrowers and lenders. But just how big is the typical family’s debt? How fast is it growing? How does your mortgage compare to the Joneses next door? And how might consumer debt — your debt — affect the U.S. economy?
We decided to look at the most recent numbers and take a snapshot of household debt in the United States, circa 2004. What emerges is a picture that’s both familiar and unsettling. Yes, consumer debt — encompassing credit cards, mortgages, student loans and more — is growing like a well-fed St. Bernard puppy. No, there’s no sign that the growth will slow. Yes, some economists worry about the ill effects, but no, not many of them are sounding urgent alarms.
Click the image below to hear what Dr. Boyce Watkins has to say about the new credit card legislation signed by President Barack Obama:
Even in the current job market, getting a pink slip doesn’t always lead to long-term unemployment – especially if you’re willing to do the extra legwork it takes to get hired these days.
When David Hudson was laid off from his computer programming job, he sharpened his skills, did his due diligence and took full advantage of the resources available to him.
Hudson, 40, was lucky enough to get a heads up before his employer gave him the ax. He was notified in early February that his firm would have to make cuts and his last day would be March 6. He made sure to use the time wisely.
"I put myself in the place of the employer," he explained. "What would the employer be looking for, what would catch their eye?"
U.S. President Barack Obama signed into law on Friday sweeping reforms that restrict credit card interest rates and fees, marking a victory for Democrats trying to help recession-weary consumers and a setback for banks seeking to retain sorely-needed revenues.
The law is expected to hurt profits of major card issuers such asCitigroup Inc, Bank of America Corp, JPMorgan Chase & Co andCapital One Financial Corp. Banks say the changes may cut the flow of credit to consumers because it will make it more difficult for issuers to set rates based on the risk their customers pose.
"With this bill we are putting in place some common sense reforms designed to protect consumers," Obama said at a signing ceremony at the White House.
"We’re not going to be giving people a free pass and we expect consumers to live within their means and pay what they owe. But we also expect financial institutions to act with the same sense of responsibility that the American people aspire to in their own lives," he said.
For more financial advice, visit www.DrBoyceMoney.com.
It may shock you to read this, but you are going to die. Young people don’t seem to believe they are ever going to leave the earth and even old folks aren’t ready to accept it. Many of us become sole providers for our families under the assumption that we are going to be around forever. Well, there comes a time when we must realize that if we get into our car and head out to work one morning, we may never come back.
What happens to those we leave behind? They are left to clean up the messes that we’ve left, and you probably know at least one person who has gone to a funeral and watched their daddy’s dirty laundry pour itself out all over the front row. The funeral is a day of reckoning, from both a personal and financial standpoint. The point of death is when the Grim Reaper makes us reap what we have sewn throughout our lives.
How do you determine whether or not you have enough life insurance? Let me break it down for you.
Continue reading Do Your Children Have a Plan for your Death? You Might Want to Think Again
Hip-hop "mogul" Irv Gotti has gotten tremendous criticism for mistreating his estranged wife, Deb. Let’s be real, Irv is mean and appears to be highly inconsiderate. He cheats on Deb openly, disrespects her and doesn’t seem to care if she stays or goes.
"Irv Gotti treats his wife worse than an abandoned dog in a pound," says black celebrity gossip columnist, Lady Drama. "Any man who treats his wife like that should walk through hell with gasoline soaked pants."
But while Irv does his thing and does it wherever and with whomever he likes, his wife may not necessarily be an innocent victim. She has the opportunity to leave him and be with another man. She can draw boundaries on the relationship and not deal with his behavior. But she does not. Why is that?
In this episode of Financial Lovemaking with Dr. Boyce, we talk about Gotti and what he and his wife can do to make things right. We also answer some critical and important questions.
Continue reading Financial Lovemaking with Dr. Boyce: Is Irv Gotti’s Way the Right Way?
It’s been two months since 2-year-old Cori pulled the gold stud from her left earlobe, and the piercing is threatening to close as her mother, Maggie Anderson, hunts for a replacement.
It’s not that the earring was all that rare — but finding the right store has become a quest of Quixotic proportions.
Maggie and John Anderson of Chicago vowed four months ago that for one year, they would try to patronize only black-owned businesses. The "Empowerment Experiment" is the reason John had to suffer for hours with a stomach ache and Maggie no longer gets that brand-name lather when she washes her hair. A grocery trip is a 14-mile odyssey.
"We kind of enjoy the sacrifice because we get to make the point … but I am going without stuff and I am frustrated on a daily basis," Maggie Anderson said. "It’s like, my people have been here 400 years and we don’t even have a Walgreens to show for it."
Last weekend, I had the wonderful opportunity to go home to Louisville and attend the Kentucky Derby. Growing up, I was not allowed to participate in many of the Derby festivities. My father was a Major with the Louisville Metro Police Department and was often over security for the city’s Derby festivities. Because of this task, he was subjected to a lot of foolishness through the years during Derby in order to serve and protect the city’s patrons. Therefore, he insulated me from most of the damaging behavior that comes with having an extra 200,000 people in the Louisville metro area of only 700,000 residents. This year was only my second “true” Derby experience and it was completely different from the Derby with which my father was familiar. I was excited to get the weekend rolling!
As I boarded my plane from Ithaca, NY all I could think about was how much fun I was going to have at all of the VIP events and all of the interesting people I was going to meet. Thanks to an awesome friend, my girlfriend, Kandice, and I were given some box seats to the Derby and tickets to all of the VIP galas. I was afforded the opportunity to spend hours with some of the top entertainers, athletes, and business moguls in the nation. I quickly became disappointed, however, as I transitioned from dreaming about talking to ‘Deity XYZ’ to actually speaking to him in person.
After exchanging small talk for a few minutes, I asked each person one simple question, “What are you passionate about?” My goal was to attain deeper insight on what made them successful. After proposing the question, each individual looked at me for a moment with a perplexed expression. After a much anticipated silence, most of individuals said, “Wow . . . No one has ever asked me that before.” As people answered this question for me throughout the evening, I slowly became saddened and disappointed by their responses. I was shocked by the amount of times I heard “making money”, “ballin’”, and “I have no idea” as simple responses to the question asked of them. I then asked myself a vital question . . . Is there really anything more to life than fast cars, chartered jets, and high class sporting events?
Click to read more on the Black Authors Blog
Syracuse, NY – Dr. Boyce Watkins of Syracuse University has recently joined America Online as a financial writer and expert commentator. He will be the resident Financial Expert for AOL Black Voices, the premier Black news website in America, with over 100,000 readers per day. Dr. Watkins has been on the faculty at Syracuse University for 8 years and has worked with many major media outlets, including CNN, BET, ESPN and CBS Sports. He is also the author of “Financial Lovemaking 101: Merging Assets with Your Partner in Ways that Feel Good”.
In his role with AOL Black Voices, Dr. Watkins will provide analysis on the economy, employment issues, celebrity finances, and money management. He will use his unique style of informative, compelling, yet down to earth financial analysis to promote financial literacy within the Black community. The site will syndicate his popular financial series’ "Financial Lovemaking", co-hosted with S. Tia Brown (formerly a Senior Editor with "In Touch Weekly" Magazine) and "Get Your Paper Straight", a radio segment hosted with George Kilpatrick of Power 106.5 and WSYR radio.
Dr Boyce Watkins
I read today about the financial compensation package of pastor Brad Braxton of the New Riverside Church in Manhattan. Here is the breakdown of Braxton’s compensation:
The total value of the package is estimated to be $600,000 per year.
All I can say is “wow”. No disrespect to this man or his congregation, but he would NOT be preaching at my church. What was most problematic about the church’s decision to give Braxton such a ridiculous compensation package was that they didn’t seem to clear it with the membership, many of whom are filing suit over Braxton’s pay. As a Finance Professor, I must admit that I personally become uncomfortable hearing men and women of God talking about money more than I do. I must disagree with Rev. TD Jakes, who said that “Jesus is a product”. Sorry brother, Nikes are a product. Cheeseburgers are a product. Jesus is a spirit that should lead us to pursue a good that is greater than our bank accounts. I am not sure how many pastors agree with that assessment.
In this episode of Financial Lovemaking, Dr. Boyce and S. Tia Brown discuss Mel Gibson’s Half billion dollar divorce. They also discuss various issues that relate to how couples should merge their love and money together. Click the image to watch!
From Dr. Boyce Watkins
To the YourBlackWorld family: Some of you saw my recent critique of the RushCard, the new prepaid debit card issued by Russell Simmons. Some took my article about the RushCard and interview about the Rushcard on BBC World news and The New York Times to imply that I have serious problems with the way Russell Simmons does business. While I do not feel that Russell, nor anyone else, is above being critiqued by the Black community, it should be made clear that I respect much of Simmons’ work, especially what he has done to reduce the severity of the drug laws that incarcerate so many Black men across America.
I must admit that I’ve been disturbed by the recent trend of African American urban role models lending themselves out to companies such as Rent-a-Center to encourage people of color to participate in arguably one-sided financial transactions. But I must be clear when I say that the RushCard is not necessarily a bad deal for those who need it. My greatest challenge to President Obama is to find ways to ensure that all Americans have access to basic services, such as bank accounts, so they are not forced to pay high fees in order to access their own money. I cannot endorse an argument which states that Russell is necessarily a philanthropist (as his ads claim) because his company provides an option that improves upon the horrific options already in place. So, while I agree 100% that the RushCard is better than check cashing venues in the Black community, my greatest concern is that many members of the urban poor are still paying the high cost of poverty in America. It is my hope that Russell sincerely fulfills his role as philanthropist, leader and financial enabler by genuinely working to solve critical liquidity and financial literacy problems in urban America. I have complete faith that he can accomplish whatever he puts his mind to.
So, out of fairness to Russell, I want all of you to see his response to the New York Times piece, which is written below. My goal is not to think for you, it’s to encourage you to think for yourself.
President Obama said Saturday he will ask all of his department and agency heads for specific proposals for cutting their budgets at his Cabinet meeting early next week as he searches for ways to streamline government spending.
Obama, who is attending the Summit of the Americas in Trinidad this weekend, said in his weekly radio and Internet address that he would make the request for cuts Monday at a Cabinet meeting.
"In the coming weeks, I will be announcing the elimination of dozens of government programs shown to be wasteful or ineffective," he said. "In this effort, there will be no sacred cows and no pet projects. All across America, families are making hard choices, and it’s time their government did the same."
While discussing the need for more efficient government, Obama announced he was filling an administration position that caused him trouble on the last try. Obama said Jeffrey Zients, a CEO, management consultant and entrepreneur, will join the administration as the government’s chief performance officer and will also serve as deputy director for management of the Office of Management and Budget. He will work to streamline processes and cut costs, Obama said.
In a speech today, the Federal Reserve chairman Ben S. Bernanke talked about the need to “strike the right balance: to strive for the highest standards of consumer protection without eliminating the beneficial effects of responsible innovation on consumer choice and access to credit.”
Where exactly regulators think that “balance” lies has varied greatly over time. Throughout American history, politicians and their constituents have viewed access to credit as alternatively empowering and exploitative. We can’t seem to decide: Is making credit available to “subprime” borrowers helping them, or taking advantage of their ignorance?
This study examined whether socioeconomic indicators including wealth, parents’ education, parents’ occupation, and parents’ income predicted the academic outcomes of African Americans and European Americans differently. Using a sample of 1,302 African American and 6,362 European American public high school students drawn from the first- and second-year follow-up of the National Educational Longitudinal Study of 1988, the study found that socioeconomic status (SES) accounted for significant variance in the academic achievement of African American students, and that wealth explained variance for students of both ethnicities beyond what was explained by SES alone. Wealth accounts for greater variance in outcomes of African American students than of European American students.
In her presidential address before the American Educational Research Association (AERA) in April 2006, Gloria Ladson-Billings called attention to the relationship between wealth and what she called an "achievement debt" accruing to African Americans over centuries in the United States. Her thesis, supported by a growing body of research (Conley, 1999; Orr, 2003; Shapiro, 2004) and testimony among African American scholars and elders, was that differences in educational outcomes between African American and European American students related to the historical denial of resources-social, intellectual, and financial capital-as a legacy of slavery, Jim Crow policies, and more subtle institutional racism.
Dear Mr. Simmons:
My name is Ryan Mack and I have followed your career for most of my life. I have been a long-time admirer of your work, a tremendous fan, and believe that millions are inspired by the paths that you have created in the field of Hip-Hop. More importantly, as an advocate for financial literacy myself, I believe that the work that you have been doing through the Hip-Hop Summit Action Network as it relates to financial literacy has been second to none. However, I must admit to being somewhat disappointed with your recent pre-paid debit card venture – the "Rushcard."
The pre-paid debit card industry has always been an industry that is built upon a lack of knowledge within the community. It is an industry based upon the legal phrase which demonstrates that "false imprisonment is an intentional tort." In other words, if I put someone in a room and do not lock the door but tell them that the door is locked, they will remain in the room because they believe the door is locked. As a result of my action, I have committed a punishable crime. I view pre-paid debit cards in the same light. Those who know the strategies to empower the community have a moral obligation to those, who may not be as knowledgeable, to fully inform them. There are other more efficient means to empower those in our communities than pre-paid debit cards and other financially destructive establishments such as check cashing facilities. The typical bank offers free debit cards that if used properly do not have any fees affiliated with them and can be used for the same purpose as the pre-paid debit cards.
If we compare the fees affiliated with the Rushcard compared to the typical bank offered debit card, we can clearly see the advantage of the cards offered by the banking institutions.
Rushcard vs. Typical Bank Card
Activation Fee: Rushcard = $19.95 Typical Bank Card = Free
Convenience Fee: Rushcard = $1.00 Typical Bank Card = Free
ATM Cash Withdrawal: Rushcard = $1.95 Typical Bank Card = Free (At Branch)
ATM Balance Inquiry: Rushcard = $.50 Typical Bank Card = Free
Bill Payment: Rushcard = $1.00 Typical Bank Card = Free
Inactivity: Rushcard = $2.95 Typical Bank Card = Free
Refund of Rushcard/Bank Card via Check: Rushcard = $5.00 Typical Bank Card = Free
Dr. Boyce Watkins, one of the world’s leading Financial experts and Black Social commentators, spoke with BBC World news about the RushCard, which has been heavily adopted in Black communities.
Watkins wrote this commentary about the Rushcard and you can click the image below to listen in on the interview. Dr. Boyce Watkins is a Finance Professor at Syracuse University and Financial Writer for America Online. He asks whether or not Russell Simmons is a pimp or if he is helping the Black community.
Why Financial Predators Usually Have Black Prey
By Dr. Boyce Watkins
www.DrBoyceMoney.com
I talked to my good friend Ryan Mack, CEO of Optimum Capital Management, the other day. Ryan wrote an interesting piece about The Rushcard, a new prepaid debit card offered in a partnership between Russell Simmons and Unifund, a company that typically makes its money from bad debt collection. I read the piece curiously, as I have been learning how the Rushcard works, why it exists and who might benefit from the service. On the flip side, there is the larger concern that someone might be taking advantage of those who have the least access to capital, largely African Americans in poor communities.
The Rushcard is a prepaid banking card with no credit check that allows consumers to deposit their paychecks onto the card, as well as make purchases and withdrawals as if the card were a regular Visa. Russell (a self-proclaimed “philanthropist”, a title likely used to pre-empt any accusations of fraud or exploitation) also argues that the card helps marginalized Americans to seek out the American dream.
I didn’t know that the American dream was to hold a piece of plastic. Credit cards have created an infinite number of American nightmares as they tend to breed excessive consumption. But one can certainly argue that this card deals with one serious problem in the Black community: a lack of access to capital and banking services. Many people in urban America can’t get bank accounts. Many more have bad credit, can’t get rental cars or find themselves leaning toward check cashing services to liquidate their paychecks. Russell, “the philanthropist” has apparently taken it upon himself to solve this problem.
I can say, as a Finance Professor, that the Rushcard would likely not make money if it were not filling a critical need. The problem, however, is that those who “help” individuals in need may end up abusing their power. One can argue that a pimp is “helping” a young homeless girl by giving her a place to live. A loan shark can say that he is “helping” a family get the money they need by lending the funds at exorbitant interest rates. A man who sells water for $10 a sip is “helping” a man in the desert get what he needs to survive. So, there is a thin line between “helping” someone vs. exploiting a given need or weakness.
I became quite concerned when I saw the long list of complaints from those using the Rushcard. Those who wrote the comments I saw on a blog about the Rushcard seemed to have serious problems with the customer care behind the card. In his article, Ryan does an interesting comparison between the fees of the Rushcard vs. those of a typical Bank card:
Rushcard vs. Typical Bank Card
Activation Fee: Rushcard = $19.95 Typical Bank Card = Free
Convenience Fee: Rushcard = $1.00 Typical Bank Card = Free
ATM Cash Withdrawal: Rushcard = $1.95 Typical Bank Card = Free (At Branch)
ATM Balance Inquiry: Rushcard = $.50 Typical Bank Card = Free
Bill Payment: Rushcard = $1.00 Typical Bank Card = Free
Inactivity: Rushcard = $2.95 Typical Bank Card = Free
Refund of Rushcard/Bank Card via Check: Rushcard = $5.00 Typical Bank Card = Free
So, if these numbers are any indication, it appears that the Rushcard is not a very good investment. Most reviews that I’ve seen recommend against using the card, since it appears that users are paying a premium for the Baby Phat design on the front. What’s more disturbing about the Rushcard is that Russell does not seem to be nearly as determined to fulfill his role as a “philanthropist” when it comes to helping African Americans overcome the underlying cause of the very problems he claims to be fixing. As Ryan explained it, “It’s like telling someone with a cavity that they should chew with the other side of their mouth.” The Rushcard offers few options to help people repair their credit, and I have personally found most of Russell’s financial literacy initiatives to be quite limited in impact.
While we cannot blame Russell Simmons and others for profiting from the lack of financial literacy and access to capital in the Black community, there are things we can do to encourage Russell to do the right thing. First, the Obama administration can and should implement programs to help those with poor credit obtain bank accounts. Every American should have access to a bank account, and services such as direct deposit should not be a luxury. Secondly, the Banking industry should stop passing over profitable investment opportunities in the Black community. Perhaps if Russell had more competition, his fees might go down. Third, there is no greater cure for money problems than good old fashioned financial literacy. Most victims of financial exploitation are not even aware that the exploitation is taking place. Financial literacy should be taught in every public high school in America, since it might actually be the one class that students actually use.
Russell Simmons is not necessarily a philanthropist, but he is not the devil. He is merely a symbol of a larger problem. The problem requires long-term solutions, and a high cost piece of plastic is certainly not one of them.
Dr. Boyce Watkins is a Finance Professor at Syracuse University. He makes regular appearances in national media, including CNN, BET, ESPN, and CBS. For more information, please visit www.BoyceWatkins.com.
