Yes, many poor people do fall prey to scumbag corporations trying to take advantage of the poor's lack of sufficient on-hand cash. However, the OP uses an example of an unnecessary smart-phone that is extremely pricey, even if paid in cash. It is an effort to suggest that reckless purchase of luxury items is the main source of their woes.
It would signal a lack of proper priorities.
However, their insufficient on-hand cash forces the poor to pay 2-5 times the price for many critical things and non -luxury items as well. It applies to beds, and all basic furniture, to bikes (which are often neccessary transportation), to computers (which yes are neccessary these days for many things from keeping up in school and the job market, staying minimally informed, finding consumer bargains, etc.). Pretty much every consumer product that is more than $50 is something the poor often pays more for due to their need to use lay-away.
It's not just lack of "on hand cash" but also lack of access to reasonable credit which is usually due to poor credit which may be due to missing payments or high debt already carried.
This need to pay in "installments" even for basic goods is not the only reason the poor pay more for things.
That is one thing that makes me weary of suggestions to simply ban these types of loans or loan-like products. People who have no access to regular loans might really need those products for genuine needs even if it costs them more. But it's important to use it prudently.
They also simply are not able to hunt and go get better bargains. If you live in the poor part of town, you likely have fewer stores (other than liquor stores) nearby and thus you pay more.
Well there is internet shopping.
If you lack a car, then you have a much smaller area in which you can look for better deals for everything from preschools, to groceries, to an apartment.
True, but on the plus side not having a car can save you fortune. That said, most poor people in the US have cars for the simple reason that most places in the US are very car-centric. The family with the expensive ($1,500 cash price, ~$4,500 total cost) sofa/loveseat from the WaPo article has a car for example.
If you cannot afford the moving costs (and these days, non-refundable $1000 "move-in fees charged by apartments), then you are not able to take advantage of cheaper apartments that become available in your area, which would save you lots of $ in the long-run.
Yes, yes, when you do not have money everything is more difficult. But that doesn't excuse wasting what little money you have on frivolous purchases, especially when you have to finance them with rent-to-own.
Another factor is that it is nearly impossible to be poor and have a good credit score, because good "credit" actually requires that you have and extensively use credit cards.
That is actually wrong. All you need is to use credit cards at least every few months to maintain the credit as active. And the lower your balance compared to your credit line is the better for your score. The two biggest parts of your credit score are credit utilization and payment history - together they make up almost 2/3 of your score.
The more $ you spend on credit, the better your score.
Wrong, wrong, wrong! You can charge little every month, pay it off each month and you will have no finance charges and excellent credit utilization.
IF you are extremely frugal and wise with your money and never go into debt, and don't buy o credit, then you will not have a good credit score.
If you eschew all credit then yes, your credit history will be lacking, but there are ways to have good credit without paying a lot on finance charges.
IT does not matter that you've had a steady job for 20 years and have never been late on rent or any other bills. Landlords don't look at anything but your "score" which is heavily determined by the accruing and then paying off large amounts of credit card debt or loans.
No, you don't need to "accrue and pay off large amounts of credit card debt or loans". You can charge a little (best <10% of your credit limit) and pay it off in full each month.
And landlords also look at your rental history from places like National Tenant Network.
This lower credit score means you'll be paying more interest on loans and will get rejected for most apartments, thus have to pay higher rents due to the few landlords willing to rent to you.
If you pay that loan on time you can improve your credit.
I just had a friend go through this. Despite zero blemishes on their credit, he and his brother with steady jobs for the last 15 years and a perfect reference from their past landlord of 10 years (the building is going condo, so they must move), they were outright rejected from 20 out of 21 places simply because they do not ever use credit, because they do not want to risk spending too much that they accrue debt and pay interest. As a result, they were forced to pay 25% more in rent than the average of the places that rejected them.
They should have used credit in the way I explained above.
