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The Real Reason The Poor Go Without Bank Accounts

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Re: The Real Reason The Poor Go Without Bank Accounts

#71

Post by dalke »

notahacker wrote: post #53
aptwebapps wrote: post #46

Earlier quoted context omitted.

How about the reason given in TFA? If you're living on the edge, financially, cascading fees and fines from a single incident can cripple you.

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 long as everyone has equal access to the same services, or at least access to the same services you do, and that there is competition among those services.

However, as the author points out, the poor areas are under-served in terms of banking choices, and banks use "private databases like ChexSystems that currently keep more than a million low income Americans from being able to open accounts."

Because of the obvious market inequality, you cannot conclude as you did that the people who use RiteCheck are making either an irrational decision or un-informed decisions.

Re: The Real Reason The Poor Go Without Bank Accounts

#72

Post by fiatmoney »

gregpilling wrote: post #2

This comment on the article reflects why many people that I have met personally do not have checking accounts or bank accounts. They are worried about having money seized. From the comment section of the article - "If you would really like to know why poor people regular these establishments I'll tell you why: it's because they keep you off the grid. I used to have a checking account too all my life. But after I lost…

It's also not unknown for a state you used to live in to suddenly decide you owe them a large amount of taxes, and take it directly from your bank account.

Re: The Real Reason The Poor Go Without Bank Accounts

#73

Post by omonra »

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…

This is a great comment, thank you

I guess at the end of the day, poor people present poor revenue opportunities for banks. So the banks resort to underhanded methods (ie ones that customer would not agree to if they were given a choice). In turn, these customers learn to mistrust the banks and turn away.

Re: The Real Reason The Poor Go Without Bank Accounts

#74

Post by Plasmoid »

_delirium wrote: post #24
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…

> Many banks over the last century have run out of money and been unable to honour withdrawal demands/requests. It's reasonable and logical not to trust them to keep your money and give it to you when you ask. Within the last century, yes, but quite far back within it: the last time anyone with modest amounts of money in the U.S. lost deposits in a bank failure was 1933, the year the FDIC was created. You can still l…

The bigger risk if your poor is not having access to your money while the FDIC sorts out the problems. Now, I don't know how long it would take to restore access to your money in a bank closure but, for a lot of these people, having your funds frozen for a week or two would be crippling.

Re: The Real Reason The Poor Go Without Bank Accounts

#75

Post by dalke »

belorn wrote: post #31

While the alternative financial service providers is taking the road of improved customer service, the banks are going the other way. In Sweden, most ATMs is set at a maximum withdraw of 100$, while a few is set at $300. The bank itself also adds additional restriction of maximum $2000 per week. If you want to withdraw more of your own money, you have to ask permission and give a reasonable explanation why one is tak…

"In Sweden, most ATMs is set at a maximum withdraw of 100$, while a few is set at $300."

I think you did a conversion error from SEK to USD. Did you mean $1000 at a time?

The documents you referenced say Swedbank has a max of 8 000 SEK/day, Nordea's is 5 000 SEK/day, SEB has 10 000 SEK/day, and so on. (Under-16s have a limit of 1 000 SEK/week.)

That would correspond more to US$1,000 than $100.

FWIW, I had a limit of $200 or perhaps $300 when I lived in the US.

According to https://www.tcfbank.com/customer-service_tcf-convenience-ser... , a US bank, "The daily withdrawal limit varies by account. In general, you can withdraw a maximum of $500 daily." I think this is typical.

I've never pulled out more than $2000 per week from Swedbank. I do know they are an anti-cash bank, and want to get rid of handling cash. ("It's environmentally better if we don't have to drive the money around" and "It's safer because it prevents people from being robbed.")

Sweden doesn't even really like bank machines. See http://www.thelocal.se/50228/20130913/ - "Sweden second worst in EU for ATM shortage":

> pensioners staged a protest after another automatic teller machine was recently bricked up. Their actions prompted the Nordea bank to pledge to open a new ATM before the end of the year.

> Sweden is among the main countries leading the way for non-cash payments. Several businesses will now only accept cards while some bank branches don't handle cash at all.

> Swedish researcher Niklas Arvidsson recently wrote a report suggesting that the country could be cashless by 2030. However, he added for that to happen a complete ban on cash was likely needed.

Re: The Real Reason The Poor Go Without Bank Accounts

#76

Post by Glyptodon »

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…

Even if you aren't poor, moving frequently or living on the road can cause you all kinds of problems with traditional institutions. So many things in our society rest on an unquestioned assumption that people 'live' in one place and don't move more than once a year and maintain a steady mailing address.

Re: The Real Reason The Poor Go Without Bank Accounts

#77

Post by laaph »

blahedo wrote: post #63

When I read an article like this, I'm always amazed that more people haven't discovered credit unions. Most of the objections that the article raises about "banks" are objections that I have too, except that they're really about "big (multi-)national banks". My experiences with credit unions have been much more in line with what the author describes about the check-cashers. On one occasion there was an incident invol…

I've never been treated that much nicer at credit unions than banks. My last story with a credit union - I had been with them for years, but when I have a story as soon as I ran in to hard times. I was 62 days overdue on my credit card (which was also with the credit union), and I was told the credit card department I'd deposit a check on Friday and make a payment. Meanwhile, the checking department closed my check account, and took the $10 there and applied it to my credit card. Since I had written a rent check before putting a check in the bank and finding the account was closed, it messed me up even more.

I'm about to be in difficulties with a current credit union, we'll see how they treat me as my clients keep their outstanding debts to me just a little more outstanding.

Re: The Real Reason The Poor Go Without Bank Accounts

#78

Post by morgante »

The meat of this article, hidden underneath all the fluff, is simply that fees are higher and poor people end up paying more of them.

Honestly though, they probably deserve that. I've never in my life been charged an overdraft fee because it doesn't take much to just track the payments you make and never go over.

Of course, an inability to plan is probably why they're poor in the first place...

Re: The Real Reason The Poor Go Without Bank Accounts

#79

Post by bhickey »

cdh wrote: post #26
woofyman wrote: post #19

Earlier quoted context omitted.

USA banks are federally insured, so there's no risk in losing your money. Running away from creditors is not a valid reason. They can sue you. They can't directly take your money.

Well, that's not quite true. There is always a small risk of losing some (or even all) of your money, particularly if you have a large amount in your account. Obviously that risk is very, very low for smaller amounts of money.

There are risks we should be concerned about, and risks we should not be concerned about. If you stuff money under your matress, the risk of losing it to a house fire or robbery are several orders of magnitude greater than losing it in a bank run.

Assuming your account is under the FDIC limit, how could you lose money on an insured account? Suppose there's a massive bank run and the Fed has to print oodles of cash to repay depositors. This leads to runaway inflation that occurs over a very short period. If you could have otherwise exchanged your cash on hand for a different currency, sure you would have lost money.

Compared with the actual risks of being unbanked, this is a hallucinatory concern.

Re: The Real Reason The Poor Go Without Bank Accounts

#80

Post by saurik »

I am not buying this; I agree that poor people not using banks is an issue, and I appreciate a number of interesting reasons why this is the case (the list iterated by patio11's comment is amazing): I do not, however, think it is because banks are turning into impersonal institutions with which you never interact with a person.

Sure: this author doesn't generally interact with her bank. She doesn't see the need to, so she isn't choosing to; but, the bank she is using does have a branch she went to, and if she actually went there at all often the people there would get to know her. The building might be "impersonal", but the people are still people.

This doesn't even just apply to small banks (a friend of mine has always used local banks): I use the Bank of America, and almost everyone at my local branch knows me because I go there often and actually talk to them. I seriously look forward to making a wire transfer because I enjoy the interaction with the people I know there.

Corporations with local offices are still made out of people; like, while I prefer automated payments, if I end up in a situation where I need to write a check, somehow that's on the other side of "I may as well drive to your office and hand-deliver it"; this meant for a long time I even knew the people who worked at my car insurer ;P.

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