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The Real Reason The Poor Go Without Bank Accounts

theatlanticcities.com

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Re: The Real Reason The Poor Go Without Bank Accounts

#211

Post by dalke »

waps wrote: post #169
dalke wrote: post #71

Earlier quoted context omitted.

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…

The people we are talking about use cash, but need a service to turn checks into cash.

You propose what you think should be a better solution. This history so far shows that your solution is not clearly better. Just this month "The Consumer Financial Protection Bureau issued a bulletin warning employers against using only so-called payroll cards to pay workers." ... "Complaints received included fees for withdrawing cash and checking card balances. Critics say payroll cards with high fees mean that some workers are essentially making less than minimum wage." -- http://www.usatoday.com/story/money/business/2013/09/13/agen...

Yes, there can be a time where that's a better solution than a check.

However, we are not yet at that time, so it's not a rational choice NOW.

Re: The Real Reason The Poor Go Without Bank Accounts

#212

Post by SolarUpNote »

steveklabnik wrote: post #126
bilbo0s wrote: post #108

Earlier 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 something in the mail about a class action lawsuit against my bank for that very thing (processing transaction out of order to maximize overdraft fees)

I'd be happy if I could just turn off overdraft "protection" altogether.

Re: The Real Reason The Poor Go Without Bank Accounts

#213

Post by rmc »

dobbsbob wrote: post #168
steveklabnik wrote: post #126

Earlier quoted context omitted.

> (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 sin…

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

That's one of the biggest problems with poverty. You can get stuck in the trap and you can't work your way up. Often things get more expensive as you have less money. You can't buy things in bulk and get the savings of economy of scale. You can't afford to go further to get a cheaper thing. You can't afford to get that item today even though it's cheaper. You can only afford short term, more expensive solutions.

Re: The Real Reason The Poor Go Without Bank Accounts

#214

Post by xioxox »

gambiting wrote: post #194
DanBC wrote: post #131

Earlier quoted context omitted.

You didn't ask for credit. They make money by giving people credit. You wouldn't have made them any money. You also didn't have any credit history. That's something that young people could be taught: "How to get a good credit rating, without being stupid and getting into tens of thousands of dollars of unpayable debt". The UK has the concept of "basic bank accounts" which are needed so people can have state benefits…

I have a bank account with Santander in the UK. The account doesn't have overdraft(I specifically said I don't want one) and I was also given a Visa Debit card with it. It is silly that I have to pay fees for it(5 pounds ~ $7), but as far as I am aware no bank in the UK offers account that don't cost any money to run, which I personally don't understand.

Sorry, but what do you mean? There are plenty of accounts in the UK where you don't have to pay anything, as long as you don't go overdrawn. I have an account with the Halifax which actually pays you £5 a month if you pay in over £1000. Most of the major high-street banks have a free account and there are basic bank accounts which are mostly fee-free available in many banks. In the UK, you usually don't pay fees to withdraw cash, either.

Re: The Real Reason The Poor Go Without Bank Accounts

#216

Post by jes »

jmadsen wrote: post #202
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…

banks are among the slimiest for finding ways to run up fees on you - I believe it must be their primary source of income these days. It's not just the US - as patio11 knows, here in Japan, the banks charge you a "convenience fee" for using the ATM when the bank isn't open. Using an ATM vs a teller actually SAVES them money. This is the most ballsy thing I've ever seen, and exists only because most Japanese don't rea…

If you were the bank, would you set your fees based on cost plus a reasonable profit, or would you set your fees based on what your customers were willing to pay?

Re: The Real Reason The Poor Go Without Bank Accounts

#217

Post by GFischer »

eriksank wrote: post #190
notahacker wrote: post #16

Earlier quoted context omitted.

We're talking about the US in the twenty-first century: profitable local ventures can borrow money at low interest rates from non-local commercial banks at much better rates than the check cashers could possibly offer. The check cashers don't offer deposit accounts because they couldn't possibly invest their received funds well enough to pay interest after covering the overheads of managing many tiny retail bank acco…

The check cashers don't offer deposit accounts because ... they are not allowed to.

And here we find one of the root causes... regulation (overregulation?)

Re: The Real Reason The Poor Go Without Bank Accounts

#218

Post by coolnow »

gambiting wrote: post #197
rm445 wrote: post #34

This article has a lot of fluff and before getting to the point. It just seems unlikely that the success of these shops that provide expensive financial services to poor people is all down to the human touch. I see friendliness in the report but not much in the way of personalised service (just the lady with the payment plan). The benefits of paying a percentage to get your money a couple of days earlier are clear en…

I have a bank account in Poland,and the account is 1) free to run,no monthly fees 2) cards are free if you spend at least $30 per month, otherwise it is $0.50 per card,per month 3) there is no overdraft(unless you specifically ask for it, I didn't) 4) nobody uses checks,so "unarranged overdraft" is virtually unheard of, I only once went "under" when I sent a large sum abroad, but then a few days later when the money…

With my extremely elementary understanding of the banking system, i'd think they loan the money you put in your account to others, and make money from the interest from that.

Re: The Real Reason The Poor Go Without Bank Accounts

#219

Post by gambiting »

xioxox wrote: post #214
gambiting wrote: post #194

Earlier quoted context omitted.

I have a bank account with Santander in the UK. The account doesn't have overdraft(I specifically said I don't want one) and I was also given a Visa Debit card with it. It is silly that I have to pay fees for it(5 pounds ~ $7), but as far as I am aware no bank in the UK offers account that don't cost any money to run, which I personally don't understand.

Sorry, but what do you mean? There are plenty of accounts in the UK where you don't have to pay anything, as long as you don't go overdrawn. I have an account with the Halifax which actually pays you £5 a month if you pay in over £1000. Most of the major high-street banks have a free account and there are basic bank accounts which are mostly fee-free available in many banks. In the UK, you usually don't pay fees to w…

Well I might be completely wrong, I checked 4 different banks and the cheapest one was Santander, and not a single one was free. In any case - I absolutely hate Santander, would switch in a pinch - any recommendations?

Re: The Real Reason The Poor Go Without Bank Accounts

#220

Post by kekumu »

jakejake wrote: post #157
steveklabnik wrote: post #126

Earlier quoted context omitted.

> (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…

It's called transaction re-ordering. The bank claims the that large transactions (like rent, mortgage, etc) are likely to be the most important and that you, the customer, would want those to be processed first. But, the math works out in favor of the bank because you get more fees (exactly as you showed in your example). I remember this being in the news several years ago. I don't remember if anything came of it, ma…

IIRC Bank of America lost a class-action lawsuit over this practice. I didn't opt-in to overdraft protection precisely because of stuff like this. I'd rather just be denied.

I got hit with several overdrafts after some tickets I purchased finally got charged a month after I purchased them. Even better was that I never got any text messages to warn me. I set up alerts for low balances and whatnot, and somehow this was the one day it failed to work. If it had, I would have transferred money from another account and avoided any problems. I've been meaning to find a new bank (or credit union) since.

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