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Choose community over credit cards by starting a lending circle for a debt free 2020

Updated: Feb 19


Americans paid close to $104 Billion in credit card interest in 2017 and carried an estimated amount of $927 Billion in credit card debt.
We have trusted networks to help us with the things closest to our hearts.

Credit cards can make it really easy to manage cash flow. For example, if you are waiting on your paycheck and need to make a purchase, a credit card is a great way to take out an interest-free loan for 20-30 days, which can then be paid off in full before the interest starts accruing. However, a lot of Americans put expenses on their credit cards, knowing that they will not have the cash to pay off the balance in 30 days.


Is a credit card with its double-digit interest rate the only way out if someone doesn’t have savings to cover those expenses? Maybe not. Let's take a step back, have you ever picked up a friend's kid from school because they would do the same for you, or fed their cat while they were on vacation because they watched your dog? Have you ever been to a potluck, been a part of a book club, or had a friend house sit for you? We have trusted networks to help us with the things closest to our hearts. Often these have personal and/or financial value - like our children, pets, and apartments. Can we utilize similar trusted networks to promote mutual financial wellness? The answer is unequivocally yes!


Can we utilize similar trusted networks to promote mutual financial wellness?

These types of networks - known as friendly societies, housewives’ saving clubs, mutualistas, and informal lending clubs - have existed for hundreds of years, all over the world, providing interest-free loans to their members. These loans are made on a strict schedule and used for the same types of expenses where credit cards fall short: expenses too small for a bank loan, and too big to use a credit card without accruing significant debt. These in-between large expenses - family vacations, a rent deposit, medical bills, household appliances, car repairs, debt repayments - are the types of purchases that many consumers can’t pay off in 30 days, putting them in situations where they are burdened with paying high-interest rates over an extended period of time. Don’t let the “friendly,” “housewife,” and “informal” aspect of this financial tool distract you from its absolute ingenuity as a zero-interest financial tool. These networks can save participants hundreds of dollars in interest by helping them pay off high-interest debt, or be an instrument for a big-ticket purchase.


Being communal, these types of networks are not just good for the pockets but also good for the soul.

If you are having trouble wrapping your head around this, think of it as a communal payment plan, where all participants pay an installment every week or month, with the money accrued during that time period going toward the short-term financial goal of a different participant. This continues until all participants have received a payout.


For the participants who receive their payout earlier, this is zero-interest credit, for ones receiving it later in the cycle, this is an automated savings plan.



Let’s say you are getting married and your wedding venue costs $8000. The venue does not have a payment plan and you need to pay in full. You don’t have savings to cover this expense and plan to finance it with your credit card. With an average APR of 16% and a $500 a month payment, it would take you 19 months to pay off the balance and would cost you $1058 in interest. However, if you and your partner were able to create a savings club with trusted friends and family, paying the same amount per month, you would be able to pay off the amount in 16 months without interest, while helping others reach their financial goals. The $1058 that you save can now go towards your honeymoon. It is true that communal saving lacks the flexibility of credit cards, which can be swiped anywhere, and anytime; however, they make up for it in other ways.


Group saving requires intentionality, trust, discipline, and planning. And like any good habit, once it gets rolling, these good habits will help your community achieve everyone's financial goals, including your own.

Like bad debt piles up, small financial wins can pile up as well. Compound interest can work in your favor where investing what you save in credit card interest, can leave you with a tidy sum over a period of time. Like yoga for the body and the meditation for the mind, communal saving can help bring that much-needed balance to your financial wellness. Check with your friends and see what they think of communal savings plans. If they want to try it out, then you could all be on your way to interest-free payouts for vacations, weddings, debt repayment, and other life-changing experiences.


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