The Real Reason The Poor Go Without Bank Accounts • Hacker News Board

Re: The Real Reason The Poor Go Without Bank Accounts

#121

Post by clarkm » Sat, Sep 21, 2013, 8:42 PM UTC

notahacker wrote: post #28

cryptoz wrote: post #13

Earlier quoted context omitted.

I disagree very strongly with that. Here are a few rational reasons that someone may choose to not have their money in a bank: - Moral conflicts. Most banks use your money for purposes that many people consider evil, so choosing to not give them your money is a rational choice. - Lack of trust. Many banks over the last century have run out of money and been unable to honour withdrawal demands/requests. It's reasonabl…

Mistrust of banks' ability to honour withdrawal requests is largely irrational in a developed country given the existence of government-backed deposit insurance (and the much greater risk of having your cash stolen). I'd actually consider this to be the classic example of irrational mistrust based on a limited understanding of who actually loses out as a result of bank failures, and overconfidence in one's ability to…

Do you not consider Cyprus a developed country? Just a few months ago, many of its citizens had their deposits garnished, some at rates of 40%. How about Greece? There were talks of doing the same there.

Re: The Real Reason The Poor Go Without Bank Accounts

#122

Post by Decade » Sat, Sep 21, 2013, 8:43 PM UTC

patio11 wrote: post #40

Some reasons which are cited in the literature, of which there exists lots ( http://www.kansascityfed.org/publicat/research/community/Unb... is a good entry point): 1) Many poor people mistrust banks, for reasons ranging from cultural ("Where I come from, they're far more likely to vanish with your cash than the mattress") to personal experience ("I was just going about my business one day but then I ran the account…

3) "Free checking."

And then, even if you (the low-income person) avoid the overdraft fees, eventually monthly fees start appearing. So far, in 10 years of using banks, I've twice closed checking accounts because they started charging monthly fees. I might try a credit union next time I need a bank account.

Keep a $3000 minimum balance or have a regular job depositing money into your account electronically, and the monthly fees disappear. Banking is, in absolute terms, too expensive for the poor.

Re: The Real Reason The Poor Go Without Bank Accounts

#123

Post by makomk » Sat, Sep 21, 2013, 8:47 PM UTC

anaccountonhn wrote: post #91

bunderbunder wrote: post #88

Earlier quoted context omitted.

It's amazing how much more biting a simple arithmetic mistake can be when you don't have the luxury of being able to accumulate any significant amount of padding money into your banking account. Almost as amazing as how blind we the privileged can be to the myriad advantages we enjoy.

Ignore trolls please.

It's not clear he was trolling - there are people who genuinely do believe all that stuff about the poor deserving it and completely fail to grasp the advantages they themselvse have.

Re: The Real Reason The Poor Go Without Bank Accounts

#124

Post by clarkm » Sat, Sep 21, 2013, 8:48 PM UTC

arjie wrote: post #96

bradleysmith wrote: post #17

Earlier quoted context omitted.

no slack in your income, and $35 overdraft fees are unarguably rational motivators to avoid big-box banking.

Even that great Satan, Bank of America, allows you to disable overdraft 'protection'. It's what I do.

It doesn't work for ACH transfers though.

Re: The Real Reason The Poor Go Without Bank Accounts

#125

Post by muzz » Sat, Sep 21, 2013, 8:56 PM UTC

wavesounds wrote: post #35

TLDR: Check cashiers have better customer service and (anecdotally) less stupid fees.

Unmentioned in the article: New York has strict regulations on check cashing that limit fees. Roughly 2%. Only a few states do this, some limit it at 5%. The check cashing business is very different in those states that don't have such limits.

Re: The Real Reason The Poor Go Without Bank Accounts

#126

Post by steveklabnik » Sat, Sep 21, 2013, 8:56 PM UTC

bilbo0s wrote: post #108

patio11 wrote: post #40

Some reasons which are cited in the literature, of which there exists lots ( http://www.kansascityfed.org/publicat/research/community/Unb... is a good entry point): 1) Many poor people mistrust banks, for reasons ranging from cultural ("Where I come from, they're far more likely to vanish with your cash than the mattress") to personal experience ("I was just going about my business one day but then I ran the account…

I only ever ASKED one poor person why they didn't have a bank account. A young mother of a student at a middle school I do work with. She has three kids and one month she was hit with fees for a) having less than a prescribed amount in her bank account. and b) writing a bad check. (Ironically, a check that was bad because of the fee taken for 'a'). Now for her, going to Walmart every month and putting her earnings on…

> (Ironically, a check that was bad because of the fee taken for 'a')

This is a real big problem in these kinds of situations.

To give you an idea of how this happens: when I was in college, I worked at a pizza shop. It was Thursday. I got paid Friday. I thought I had $20 in my bank account, but I didn't realize that day was the day that my World of Warcraft subscription was up, and that was $15. During the course of the day, I bought lunch, a snack, and some pencils or something. All that total was less than the $20, it was something like $10 for lunch, $2 for the snack, and $5 for the pencils. So I was good.

I wans't good. They applied the charges like this:

  Starting Balance: $20 
  WoW:             -$15 
  ---------------------
                    $ 5
  Lunch:            $10
  ---------------------
                   -$ 5
  Overdraft fee:   -$35
  ---------------------
                   -$40
  Snack:           -$ 2
  ---------------------
                   -$42
  Overdraft fee:   -$35
  ---------------------
                   -$77
  Pencils:         -$ 5
  ---------------------
                   -$82
  Overdraft fee:   -$35
  ---------------------
  End total:      -$117

Now, what sucks is that if they had processed them in a different order, it would have looked like this:

  Starting Balance: $20
  Lunch:            $10
  --------------------- 
                    $10 
  Snack:           -$ 2 
  --------------------- 
                    $ 8 
  Pencils:         -$ 5 
  --------------------- 
                    $ 3 
  WoW:             -$15 
  --------------------- 
                   -$12
  Overdraft fee:   -$35
  ---------------------
  End total:       -$47

Still an expensive mistake on my part, but it's more subtle than 'made a bad choice.' I was able to convince the bank to refund two of the fees so I was only out $40, but that extra $70 was a _massive_ amount of money to me at the time. It basically meant that I could only exactly squeak by for the next month, since that was basically all of my discretionary income. You can construct a similar situation which would have forced me to then take out a payday loan to make my bills, had I made one or two more mistakes in that same timeframe.

Re: The Real Reason The Poor Go Without Bank Accounts

#127

Post by thaumaturgy » Sat, Sep 21, 2013, 8:56 PM UTC

readme wrote: post #120

thaumaturgy wrote: post #114

HN is so cute. So many people here talking about why poor people do things the way they do without having ever really experienced it. Here's why poor people don't like banks: because banks don't like them. Let me paint you some pictures. You're not clean-shaven. You smell a little bit, whether because you just finished a smelly job or because you're living on the streets or because you're depressed and haven't bother…

Before I was a developer I was poor and worked as a busboy and a dishwasher for several years. At one point I mismanaged my finances and completely destroyed my credit score, as well as getting listed in chexsystems for overdrafting a bank account and not being able to pay them back for several months. To cash my paychecks (I got paid mostly in tips), I used a check cashing place or the grocery store. I did this beca…

Well, I think the article did get one thing right, something that many articles about poverty don't, and that's the kinship and us-vs-them attitude that tends to be a factor in decision-making among the poor.

Check cashing places are a lot less formal than banks (when formality is intimidating), and they tend to say "no" less often. They're more of an ally to the poor than most people would think.

But, yeah, the article should've mentioned Chex Systems.

Re: The Real Reason The Poor Go Without Bank Accounts

#128

Post by maxerickson » Sat, Sep 21, 2013, 9:01 PM UTC

bilbo0s wrote: post #108

patio11 wrote: post #40

Some reasons which are cited in the literature, of which there exists lots ( http://www.kansascityfed.org/publicat/research/community/Unb... is a good entry point): 1) Many poor people mistrust banks, for reasons ranging from cultural ("Where I come from, they're far more likely to vanish with your cash than the mattress") to personal experience ("I was just going about my business one day but then I ran the account…

I only ever ASKED one poor person why they didn't have a bank account. A young mother of a student at a middle school I do work with. She has three kids and one month she was hit with fees for a) having less than a prescribed amount in her bank account. and b) writing a bad check. (Ironically, a check that was bad because of the fee taken for 'a'). Now for her, going to Walmart every month and putting her earnings on…

She would fit nicely into category 4 though.

Re: The Real Reason The Poor Go Without Bank Accounts

#129

Post by superuser2 » Sat, Sep 21, 2013, 9:02 PM UTC

bilbo0s wrote: post #108

patio11 wrote: post #40

Some reasons which are cited in the literature, of which there exists lots ( http://www.kansascityfed.org/publicat/research/community/Unb... is a good entry point): 1) Many poor people mistrust banks, for reasons ranging from cultural ("Where I come from, they're far more likely to vanish with your cash than the mattress") to personal experience ("I was just going about my business one day but then I ran the account…

I only ever ASKED one poor person why they didn't have a bank account. A young mother of a student at a middle school I do work with. She has three kids and one month she was hit with fees for a) having less than a prescribed amount in her bank account. and b) writing a bad check. (Ironically, a check that was bad because of the fee taken for 'a'). Now for her, going to Walmart every month and putting her earnings on…

Except those debit cards have all kinds of predatory fees. They're smaller and predictable, but way more expensive than using a checking account from a credit union correctly.

For example, PayPal: https://www.paypal-prepaid.com/prepaid-debit-card/paypal_fee...

Re: The Real Reason The Poor Go Without Bank Accounts

#130

Post by byuu » Sat, Sep 21, 2013, 9:08 PM UTC

When I was 19, I tried to open a checking account. Amazingly, I was declined. For a bank account. I didn't ask for credit, in fact I had no credit history at all. I was apparently so unworthy that they didn't trust me to give them my own money. I never understood that, as I figured they'd just bounce a check anyway if I lacked sufficient funds.

I'm much older now, and have a bank account, mortgage, credit cards, and all that jazz. Just a silly anecdote that it's actually possible to be too poor to be allowed to have a bank account.