Reading this it sounds like there is a non zero minimum amount you're allowed to have in your bank accout. Is this true? I've never heard of such a thing in my country.
The Real Reason The Poor Go Without Bank Accounts
161–170 of 232 posts
Re: The Real Reason The Poor Go Without Bank Accounts
#162HN 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…
Well said.
About a year ago I walked into "my" bank (hah!) and a guy pulled me over to his desk and "invited" me to sign a form (he said was mandatory) accepting or rejecting a $35 "overdraft insurance" fee. I "invited" him to check his computer and see how many overdrafts I'd had in the past 10 years ... and that my "insurance" was keeping my checkbook balanced.
Not sure what game was afoot there, but I'd bet that some of the people who were treated to that strong-arm tactic resigned themselves to paying that monthly graft. Vampire squid indeed.
Re: The Real Reason The Poor Go Without Bank Accounts
#163Earlier quoted context omitted.
> 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 Pretty much every developed country h…
Can you please provide examples of developed countries speaking "in the last few years of forcing depositors to take losses in the event of bank failures" and which ones "have actually done it"? Cyprus is the only example that I can think of that discussed it and I can't think of any that have actually done it.
According to this http://wealthcycles.com/features/cypress-bailout-deal-is-pil... deposits under 100,000 euros were exempt, with a 40% forfeiture of amounts over 100,000. There were other proposals, but that appears to have been the actual outcome.
Re: The Real Reason The Poor Go Without Bank Accounts
#164Earlier quoted context omitted.
I assume this is talking about child support payments ordered during divorce proceedings?
Not having any paper trail to attract the attention of people and organizations you owe money to is arguably the only rational reason for being unbanked in an urban area of a developed country.
Let me add a small story from my past.
While studying, I was quite poor, and rarely had any reserve cash on me. In an effort to secure me against emergencies, I borrowed a small amount from a friend and put it in my bank account. It was not to be used except if the house burned down and I needed a motel or if some other unlikely event occur.
After my studies was done, I was unemployed and thus went and sought some social security money to pay rent with. When the first check came in, it was reduced with the amount I had in the bank.
TLD: paper trails are contextless, and do not always paint the correct picture. Giving the state this information can be quite costly on a personal level.
Re: The Real Reason The Poor Go Without Bank Accounts
#165Reading this it sounds like there is a non zero minimum amount you're allowed to have in your bank accout. Is this true? I've never heard of such a thing in my country.
In the U.S., banks can charge you a fee for having less than an agreed amount in the account. They're required to tell you in advance what that minimum amount is (and it may be $0), but they're free to set their policies at will.
Re: The Real Reason The Poor Go Without Bank Accounts
#166Earlier quoted context omitted.
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…
I just got a letter in the mail telling me that I'm a beneficiary of a successful class action lawsuit against my bank for doing this.
Re: The Real Reason The Poor Go Without Bank Accounts
#167Earlier quoted context omitted.
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…
> 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 Pretty much every developed country h…
This sort of argument is what the article complains about. Yes there are easy protections that prevent very rich people from losing money. (The $100k limit simply causes them to open a lot of accounts. Which is why you have mint.com to keep track of it all, I guess. But any rich person will have 4-5 $99999 balance accounts, and have 4-5 of them in multiple countries (US, EU, Switzerland, Dubai, Australia for example), and they know why. There's firms that will arrange it for you).
Suppose you're poor. You do not have the money to support yourself 2 months. You call the helpdesk for cox, they come and repair your cable modem, but somehow they "blame" the problem on you, and that's $250 for riding out thank you very much.
Now let's assess what happens in 3 situations : 1) you have a bank account - the money's gone the moment they say you spent it with them - you have no recourse - you call them - they've got everything they want, you have zero negotiating position - even if you achieve the impossible and talk them out of it, the money's gone for 2+ months 2) you pay by credit card (obviously only available to "the rich", granted, not quite "the 1%", but I'm pretty sure >20% of Americans effectively don't have access to a credit card) - the money's gone the moment they charge you - you call them up, ask what's going on, they don't cooperate - you threaten them with a chargeback - they will suddenly become very cooperative 3) you don't have a back account (with positive balance) - their payment request bounces - they have no recourse - they call you and ask if there's anything they can do - they're pretty cooperative
The "mystery" of why poor people, students, ... go with option 3 is not much of a mystery to me. It's because option 2 is not available to them.
The same goes for being a customer of any service firm. Internet, telephone, car insurance, ...
Re: The Real Reason The Poor Go Without Bank Accounts
#168Earlier quoted context omitted.
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…
When I was a student I was broke, and lived off a tiny income of $800 a month for food. I bought a 3G mobile stick which didn't work, and immediately returned it the next day and cancelled the service.
Of course, they never cancelled service so a year later I get collection phonecalls that I owe them $1,000. Regardless of me disputing the bill they instead debited my bank -$1,000 which I had no idea they could do since I didn't have overdraft. What they did was wait until 11:59pm the day before I was to be paid out $800 direct deposit from my pitiful p.t job and the bank allowed it to go through, then charged me interest on the negative balance for those few hours where they overdrafted the account.
I woke up to -$280 in my account in overdraft fees and the theft of my money from that telecom. Being that I couldn't feed myself I had to go out and do cash loans at extreme interest and was in a cycle of poverty for 3-4 months after that until finally got my money back from those assholes. I closed my account after that and asked to be paid out in cash from my job instead.
Re: The Real Reason The Poor Go Without Bank Accounts
#169Earlier quoted context omitted.
The rational response to concerns about crippling fees is to choose an account without a minimum balance or with low overdraft fees, or preferably no overdraft facility at all. Sure, people living on a financial edge are often less well-informed than the general public when it comes to understanding fees, but it's probably rare for the optimal solution to be paying 2%[1] of your meagre income to the nice guys at Rite…
You speaking of rational responses. You likely refer to the rational expectations hypothesis in economics. The default assumption is of course that everyone makes rational decisions, including the poor. Since they are making decisions that you don't think are rational ("it's probably rare for the optimal solution ..."), you conclude that the reason is that the poor people are less well-informed. This makes sense, so…
It's not the rational response at all. The rational response is to get a bank account like your wallet. One that ASKS YOU explicitly for permission before paying out money to someone else.
A bank account is not that, at all. A credit card is closer to that (because of chargebacks). Prepaid credit cards, and getting a new one every month (carrying over the balance, and because of the number changes, it's very hard to charge you things you don't want to pay for), are better still. Cash is best.
You want to improve the situation of 90% of America's poor ? Find a way to convert a check into a prepaid credit card (with balance transfers from a previous prepair card, ideally), for as low a fee as possible. Make that option available in poor neighbourhoods. When you have that, offer a bank account to them as well, NOT linked to the credit card, fee-free (no-one will care if it's also interest free) that they can save money into.
Re: The Real Reason The Poor Go Without Bank Accounts
#170My friend had $150k in his bank account that was taken by the IRS while they were still in negotiations on a huge tax bill. No notification, no nothing. He only found out after he was trying to buy groceries and his card was declined. After it was all said and done he ended up owing the IRS ~$14k and they gave him a check for the difference, but it took months to get it all sorted out. I lent him some money to get hi…
I heard of a guy that did that and his ex girlfriend told her new gangster boyfriend (real gangster) where he kept the money. It's probably safer to keep your money in the bank.