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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

#221

Post by djeikyb »

Decade wrote: post #122
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 m…

All the credit unions in my county (sw usa) charge monthly fees for "low balance" checking accounts unless you meet several stringent requirements, like: >= 30 debit card transactions, >=1 direct deposit, e-statements, etc. These are and'd requirements, not or'd.

Re: The Real Reason The Poor Go Without Bank Accounts

#222

Post by cynwoody »

Geee wrote: post #33

Why is it exactly that online wire transfers aren't used in the US? As an European, I've not been in a bank since the 1990's, and never written or cashed a check. On the other hand, it's impossible to live without a bank account here. Your bank account is the only place you get paid to, whether it's salary or social security money. Also, you need it to pay your bills or transfer money to your friends.

The last time I did a wire, it was to send a 6-figure amount to Washington Mutual (RIP) to pay off a mortgage.

I logged into WAMU's web site to find out the amount and procedure, printed off the reply, and took it to the bank. The nice lady in the banking lobby took my printout and did the transfer. The fee was $15, IIRC, in 2007.

Wire transfers do entail some extra work, because the transaction is cleared in real time, whereas ACHs and bill-pays and paper checks are cleared (or bounced) in large batches that are processed daily.†

†http://www.depositaccounts.com/blog/difference-between-wire-...

Re: The Real Reason The Poor Go Without Bank Accounts

#223

Post by bradleysmith »

bradleysmith wrote: post #17
notahacker wrote: post #10

Earlier quoted context omitted.

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.

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

just to clarify, I realize there are plenty of options within the 'big box banking' world that mitigate overdraft fees (well, a few options anyway.)

What I was saying in the parent comment is that overdraft fees are a perfectly rational motivation to avoid major banks.

I personally bank with both Wells Fargo and Bank of America (for convenience, and because several family members that are international do the same; gotta have that free transfer service). I am close with a few people that have foregone banking, and paid out of pocket to have their paychecks cashed where ever they can. As far as I can understand, this is a rational decision if your income does not provide the ability to meet a minimum monthly balance of about $100 of 'slack'. If you've ever worked a menial job for a regular period, I'm sure you'll understand.

If your monthly balance variance is These overdraft fees are a profit center for banks. Even if there are options to mitigate them, what motivation do the poor have to pursue them? The burden of proof of utility is on the banks, as far as the poor are concerned. If it seems to be more convenient or cheaper to operate without them, people will. This may be partly due to ignorance, but for the most part, it is because there are small inherent costs associated with a bank account that the middle class doesn't seem to recognize.

You CAN operate with less expense with cashed checks and payment cards than you can with a bank account and a debit card. Hobos and junkies would not do so if it were not the case. Hard living makes people rational like a motherf*er. You may forego some potential interest incomes, bank protections, and countless conveniences associated with using a bank account, but when it comes down to brass tax, it just costs less.

Re: The Real Reason The Poor Go Without Bank Accounts

#224

Post by nell »

This might be the right place to ask:

Can I simply lend money on my own? setup my own site. People request for loan and I choose whom to lend money to. Kinda micro financing. How easy it is to do that?

I want to do something like $1000 @ a flat 5-10% p.a

What are the risks? Is defaulting a big issue?

Re: The Real Reason The Poor Go Without Bank Accounts

#225

Post by khuey »

jlgaddis wrote: post #90

A friend of mine works at a gas station in my hometown (a fairly low-income, rural city, pop. ~4600). After seeing him post Facebook statuses such as "Oh boy, it's the 31st and I get to work tonight" (in a sarcastic tone) a few times, I asked him about it. He tells me that on the last day of every month, there are a number of people who come to the gas station starting as early as 9 p.m. and simply "hang out". They w…

This is a pretty well known phenomenon.

http://www.npr.org/2010/10/02/130272928/midnight-shopping-on...

Re: The Real Reason The Poor Go Without Bank Accounts

#226

Post by waps »

dalke wrote: post #211
waps wrote: post #169

Earlier quoted context omitted.

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…

Well obviously spending the money should be free, as should checking the balance. Why can't we just legislate that that exists ?

Prepaid cards, fee-free for the user. Seems like a basic necessity for an economy to work smoothly.

Re: The Real Reason The Poor Go Without Bank Accounts

#227

Post by Flenser »

ilaksh wrote: post #138
Decade wrote: post #134

Earlier quoted context omitted.

1) Many people mistrust banks. I also mistrust banks. Most banks are confusing and make it difficult to tell exactly how much money you can spend, and then lie in wait to hit you with overdraft fees. For now, I'm trying out Simple Bank, but they're in closed beta. I don't personally know anybody who wants to use the invitations that came with my account. I'm also suspicious of "know your customer" laws and all that t…

There are lawsuits out relating to accounting fraud. I know they have been caught reordering transactions to increase overdrafts. I have also experienced what seems to be deliberate delays in online reporting of transactions and even one case where a transaction somehow did not appear in the record until after I had withdrawn enough money several days later that this meant my account was suddenly overdrawn. They will…

Are you talking about regular banks or Simple?

Re: The Real Reason The Poor Go Without Bank Accounts

#228

Post by omnisci »

So this woman spends some time in a cash checking place and now knows why "poor" people don't use banks?

Poor people don't use banks because you don't need a bank when you live check-to-check. One doesn't need to make a deposit when the check they just got doesn't cover their expenses from last month. So her concluding statement of "the banking industry needs to develop different fee and service structures designed to accommodate lower income depositors "makes no sense.

It's not a choice, it's not like people are like "Hmm, well I could deposit my money and make 0.5% back next month", it's more like "shit, I'm behind on my gas bill and can't have my family freezing again this winter."

The fact that the teller at the check cashing place is like "family" and they speak spanish isn't really a reason why the poors go there, it's because they don't have a choice.

As an former academic who made it out of the poverty system with some serious work and lots of scars to prove it, this article really pisses me off. Not only due to it's lack of perspective, but due to it's lack of due diligence to actually answer the question they claim to answer in the title.

Re: The Real Reason The Poor Go Without Bank Accounts

#229

Post by DanBC »

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.

I have a "basic account" with HSBC. All banks and building societies should be offering something similar.

It has no fees, so long as I don't go overdrawn. It had a regular cashpoint machine card, which they've just replaced to be a visa debit card. It has online banking.

Re: The Real Reason The Poor Go Without Bank Accounts

#230

Post by pekru »

Being a citizen of a third world country (India), this sounds all too surprising to me. Looks like banking in the US is pretty shitty for the poor.

Out here, banking works like a charm. At least, most of the nationalized banks. Nobody pays the banks anything, and they get a little interest on savings/deposits accounts. OD is not outrageously charged. Internet banking and ATMs are very friendly and totally inexpensive. Almost everyone has easy access to banks; with co-op banks and urban banks offering accounts with minimum limits of 500 INR (~9 USD), everyone can make use of banking institutions. Only those people with lots of black money would want to keep much of their stash away from banks to avoid tax authorities.

I am happy that at least our folks got basic stuff like banking right.

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