As Americans' incomes shrink and credit gets harder to come by, several industries have stepped in to make it harder

for people to get from paycheck to paycheck. These businesses claim they're filling a void left by mainstream lenders. But if you fall into the clutches of any of these outfits, you can find yourself in a far deeper hole than you're in now, with much less money available to help you climb out. Here are five businesses that you should be wary of and some alternatives that make more sense when money is tight.

1. Payday lenders

How to get rich

Only a handful of companies provided these high-cost loans in the early 1990s. Today, there are more than 19,000 payday loan outlets across the United States. (To give you a point of comparison, McDonald's, the largest fast-food chain, has about 14,000 restaurants in the U.S.) To get a payday loan, you write a postdated check (with the date usually coinciding with your next paycheck) and accept a smaller amount as your loan. For each $100 you borrow, the fee is typically $10 to $15 for a 10-day loan, although it can be higher. That fee would translate into an annual interest rate of nearly 400%.

Liz Weston Your effective interest rate will skyrocket if you can't cover the check when payday rolls around and you opt to renew the loan. Calculator: Do you have too much debt?

Payday loans were taking such a toll on our military men and women that a 2007 federal law limited the interest rate that service people could be charged on these loans (as well as vehicle title loans and tax refund anticipation loans) to 36%. Payday outlets that had infested areas near military bases cleared out virtually overnight. Such protections don't apply to most civilians, however. Although payday loans are banned in 17 states -- Arkansas, Arizona, Connecticut, Georgia, Maine, Maryland, Massachusetts, Montana, New Jersey, New Hampshire, New York, North Carolina, Ohio, Oregon, Pennsylvania, Vermont and West Virginia -- and the District of Columbia, they're allowed in others and available online, so you'll need to protect yourself by steering clear. Your best bet is to scrape up a few hundred bucks that you can keep in reserve so you won't need a payday loan. Read "Why you need $500 in the bank" for more about how to do that. If a crisis hits before you have the cash, consider these alternatives:

Ask your employer for a real payday advance. If you need money from your paycheck early, some companies will advance it to you without charging fees or interest. Get help paying your bills. Churches and other faith-based organizations may offer members emergency assistance. Low-income folks may be able to get help with utility bills, living expenses, child care costs, housing and a variety of other expenses. Start your search at Benefits.gov. Get a loan from a credit union. These member-owned organizations often have better interest rates and more flexible lending standards than mainstream banks do. You can use Find a Credit Union if you're not already a member. Take a cash advance from a credit card. Normally cash advances are a bad idea, since you usually pay an interest rate of 21% or more and there's no interest-free grace period. But if you have a credit card and your only alternative is a payday loan, the cash advance is clearly the better of bad options.

2. 'Buy here, pay here' car lots

Before the financial crisis, people with troubled credit often could get conventional, if high-interest, loans to buy cars. These days, such subprime loans are harder to find, and millions have turned to "buy here, pay here" car lots -- so called because the dealers offer financing themselves, rather than through third parties, and borrowers typically have to show up at the lots to make their monthly or biweekly payments. These dealers offer older, high-mileage cars, often with steep markups and loans that carry interest rates that can exceed 20%. The costs are so high that many borrowers fall behind on the loans, allowing the dealerships to repossess the cars and sell them again. Repossession rates are around 30%, according to the nonprofit Center for Responsible Lending, which says "collections and repossessions (are) a critical part of their business model." Buy here, pay here lots now far outnumber conventional new-car dealerships, with 33,000 lots, compared with the new-car dealers' 20,000, according to CNW Marketing Research. Buy here, pay here dealers sold nearly 2.4 million cars nationwide last year, up from 1.3 million in 2000, CNW estimated.

Continue reading the main story

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If there were no rich and poor, and everyone had an equal share of the world's total pay packet, how much would they earn? The total value of world income is closing in on $70 trillion (43.9tn) per year, and there are seven billion people in the world, so the average income is heading towards $10,000 (6,273) per person per year. Easy. But not everyone has a job and some of those seven billion are children. So another question you could ask is: "What is the world's average wage?" That is more tricky to answer, but a group of economists at the United Nations' International Labour Organization (ILO) has had a go, though they have never gone public with this information. Until now. Let's consider the scale of the Herculean task the number crunchers at the ILO set themselves. First, they work out the total wage bill for every country in the world. To do that they get the average salary from each office for national statistics, and multiply that amount by the number of earners in each country.

Data limitations
The data (for 2009) covers 72 countries, and misses out some big ones, Nigeria for example Only wage earners are counted - not the self-employed or people on benefits In some countries the data is incomplete - in South Africa, for example, it leaves out public sector workers and agricultural workers, while in Uganda it covers only the manufacturing sector

In this way, they are able to give more weight to countries which have more workers in them. The average salary in China has more influence on the world average than the average salary in New Zealand, where many fewer people live. Once they have the total wage bill for each country, they add them all together and divide by the total number of earners in the world. That gives you the answer - the world's average salary is $1,480 (928) a month, which is just less than $18,000 (11,291) a year. But these dollars are not normal US dollars. The economists use specially adjusted exchange rates - the average salary is calculated in Purchasing Power Parity (PPP) dollars. One PPP dollar is equal to $1 spent in the US. Essentially, the PPP dollar takes into account the fact that it is cheaper to live in some countries than others. The idea is that we don't care how many actual dollars somebody is paid in, say, China, but we care about what sort of stuff those dollars can buy. Continue reading the main story

More or Less: Behind the stats

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"If someone in China takes their salary of 1,500 yuan per month and they go to the bank, they will actually get $200," ILO economist Patrick Belser explains. "But this is not what we use to compute this global average, because what is important here is what people are able to buy with these 1,500 yuan, and this is where we compare to the purchasing power of the US dollars and find that it is actually equivalent to around $400." Another way of putting it is that the conversion to PPP dollars expresses how much it would cost you in the US to get the equivalent goods and services you can buy with your salary locally. Let's put the world's average salary - in PPP dollars - of $1,480 a month, or almost $18,000 a year, in context: It is less than half the average salary of the UK and the United States, where average monthly earnings are just over $3,000 a month, or around $37,000 a year It is twice the average salary of Bulgaria, and the same as the average salary in Poland The country at the bottom of the average earnings league is Tajikistan, where the average wage is about $2,700 a year - while the country out on top is Luxembourg with average earnings of around $48,000 a year You might think that $1,480 a month, or $18,000 a year, is quite high. It comes to $75 a day for a 20day working month - but it's well known that more than a third of the world's population lives on less than $2 a day. How can these two views of global incomes add up?

Child labour is common in Tajikistan, the country at the bottom of the earnings league In truth, the economists at the ILO have had to rely on very patchy statistics. Data is missing for some countries - even a country as large as Nigeria, for example. And also, the economists at the ILO are only counting wage earners. They exclude huge numbers of people who appear in the poverty statistics but not in the calculations for the average wage - pensioners, children and stay-at-home parents, for example, and even the self-employed. The number of self-employed is huge. In developed countries about 90% of working people are paid employees, but that figure is lower in many developing countries. For example, in South Asia, where many people are self employed or independent farmers, just 25% of workers are salaried. But calculating the world's average salary is still an exercise worth doing, according to Belser.

Start Quote
What it shows is that the average salary is still pretty low Patrick Belser ILO economist "It certainly tells you something about the state of worldwide economic development, I would say. We always use Gross Domestic Product (GDP) as the reference, but I think we also have a whole lot of trouble understanding exactly what is the meaning of GDP, whereas wages are a much more obvious indicator of the quality of life. "It tells you something about the quality of life of the middle classes. It tells you where most of the people are at the end of the month, and it gives you an idea of how they live - how often they can go out, what they can buy, where they can live, what kinds of rents they can afford. And that's the interesting thing, compared to GDP per capita, which is a much more abstract notion." And if you understand the limitations of this number - that it gives a rough idea of average employee salaries - Belser says it holds an important lesson. "What it shows, also, is that the average salary is still pretty low," he says. "And so, that the worldwide level of economic development is in fact still pretty low, in spite of the huge affluence that we see in some places."

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