My Day Without Banks

[ksen]

http://www.theatlantic.com/business/archive/2014/06/my-day-without-banks/372496/

Our first problem was that we couldn't cash a check.

The takeaway is that it is very expensive to be poor.

I don't know why people choose to stay that way.

 

[Derec]

It's not really about being poor. Even the poor can open bank accounts, and there are even options that don't charge a monthly fee for checking. So you might have meant "I don't know why people choose to stay that way" sarcastically, but I agree with it for real.

 

[ksen]

Of course you do.

 

[Derec]

Of course you do.

Point is, it's easy and cheap to open a checking account. Not doing so has nothing whatsoever to do with poverty. So why don't so many people open a bank account and opt to spend much more time and money? I suspect it has to do with wanting to stay off the grid because of taxes, debts/judgments, arrest warrants or plain paranoia.

 

[Loren Pechtel]

Multiple banks offer no-fee checking accounts so long as you direct deposit a check per month.

One of the checks was a payroll check.


Around here some casinos cash payroll checks for no charge (although they only do so for companies they have verified. If you walk in with a payroll check for a company they don't know they'll check them out to provide check cashing in the future but they won't cash it that day.)

 

[dismal]

The takeaway is that it is very expensive to be poor.

Are you sure the takeaway wasn't "banks are pretty damn awesome"?

 

[doubtingt]

Of course you do.

Point is, it's easy and cheap to open a checking account. Not doing so has nothing whatsoever to do with poverty. So why don't so many people open a bank account and opt to spend much more time and money? I suspect it has to do with wanting to stay off the grid because of taxes, debts/judgments, arrest warrants or plain paranoia.

If its so easy then it should take you about 60 seconds to find multiple banks that give completely free checking accounts without requiring any minimum balance.
Oh, and they need to cash your check immediately without putting a "hold" on it, since you cannot wait 5-7 bussiness days to feed your kids.
Ready, set, go!!!!

 

[ksen]

The takeaway is that it is very expensive to be poor.

Are you sure the takeaway wasn't "banks are pretty damn awesome"?

Hold on, I'll think about it for a minute and get back to you.

 

[braces_for_impact]

Neither of you know what you are talking about. If you're poor you likely have bad credit from unpaid or late paid bills. Banks turn you down for checking accounts with bad credit. Some even turn you down for savings accounts. If you do get a savings account, different banks have different fees. Some charge not just for ATM access, but also have walk up fees when you use a teller. Some banks have strict savings only accounts that ONLY function as savings accounts with no ATM card. These of course are a pain because you have to deposit or withdraw money on bank hours, which is a pain in the ass when working two jobs and taking public transport everywhere.

Many of the prepaid cards are horrible. Some charge you even if you have direct deposit, although most don't charge for that service. But, they usually charge a monthly fee, which is sometimes waived if you deposit a certain amount in a monthly period. It isn't what you can make with minimum wage. Most even charge ATM fees on top what the ATM itself charges, plus they hit you with a per purchase charge any time you use the card. I'd say 80% of prepaid cards do this. They're garbage. There are better ones out there that have come out that are relatively new. I myself just switched over to American Express Serve. I'm also looking at Simple.

Then there's check cashing stores. Most won't cash an out of state or personal check, period. Some will but with awful fees. Even with a VERIFIED payroll check the fees are usually outrageous, and then of course you have to carry cash everywhere, not to mention using cash is becoming less and less common nowadays.

 

[Derec]

If its so easy then it should take you about 60 seconds

So if it takes longer than 2 minutes it's not worth bothering about?

to find multiple banks that give completely free checking accounts without requiring any minimum balance.

Why "completely free"? Banks are not charities but for-profit businesses. But even with a monthly fee the checking account is much cheaper (and more convenient) than using check cashing places. That said, here's what I have found:
- Wells Fargo has a $10/month checking whose monthly fee is waived if you make at least 10 debit card payments/purchases per month or direct deposit $750 or more or maintain a $1,500 balance
- Bank of America has a $12/month checking whose monthly fee is waived with a $250 direct deposit or $1,500 balance or if you are a student under 23
I suspect others are similar.

Oh, and they need to cash your check immediately without putting a "hold" on it, since you cannot wait 5-7 bussiness days to feed your kids.

When I deposit a check a portion (I think first $300 but am not positive) is available immediately for cash withdrawals/debit purchases and the rest is available the next business day. I don't know where you get the 5-7 business days.

 

[Nice Squirrel]

- Wells Fargo has a $10/month checking whose monthly fee is waived if you make at least 10 debit card payments/purchases per month or direct deposit $750 or more or maintain a $1,500 balance

Really, I do all this and they still charge me $15.

 

[ksen]

Why "completely free"? Banks are not charities but for-profit businesses. But even with a monthly fee the checking account is much cheaper (and more convenient) than using check cashing places.

Why completely free? Because they use the money you store with them to make money for themselves. Why should I also have to pay them for the opportunity to use my money to make money?

That said, here's what I have found:
- Wells Fargo has a $10/month checking whose monthly fee is waived if you make at least 10 debit card payments/purchases per month or direct deposit $750 or more or maintain a $1,500 balance
- Bank of America has a $12/month checking whose monthly fee is waived with a $250 direct deposit or $1,500 balance or if you are a student under 23
I suspect others are similar.

If you had any experience with poverty you'd know that what seems like nothing fees to you and me can be crushing to a family in poverty.

 

[Nice Squirrel]

The point is: the deck is stacked against you when you are poor. What I can easily afford, others take a big hit from the fees.

 

[doubtingt]

So if it takes longer than 2 minutes it's not worth bothering about?

No, if you takes longer than 2 minutes to use google to find any banks that do this, that implies that there are very few banks do it, and thus a poor person without computer access or ability to go all over town to find a willing bank would have difficulty finding one. Thus, you are objectively wrong that it is "easy".

to find multiple banks that give completely free checking accounts without requiring any minimum balance.

Why "completely free"? Banks are not charities but for-profit businesses. But even with a monthly fee the checking account is much cheaper (and more convenient) than using check cashing places.

Free, because non-poor people can get free accounts, so if poor people cannot, that means it is more expensive to be poor just like the OP said. Whether they pay the bank to cash a check or a check cashing place, they are paying more to get their check cashed than people with more $.

That said, here's what I have found:
- Wells Fargo has a $10/month checking whose monthly fee is waived if you make at least 10 debit card payments/purchases per month or direct deposit $750 or more or maintain a $1,500 balance
- Bank of America has a $12/month checking whose monthly fee is waived with a $250 deposit or $1,500 balance or if you are a student under 23

IOW, you found zero banks that meet the criteria without adding a stipulation of having the kind of regular employment that allows you to direct deposit at least $750 every single month, a stipulation that many poor people could not meet.

Oh, and they need to cash your check immediately without putting a "hold" on it, since you cannot wait 5-7 bussiness days to feed your kids.

]When I deposit a check a portion (I think first $300 but am not positive) is available immediately for cash withdrawals/debit purchases and the rest is available the next business day. I don't know where you get the 5-7 business days.

When was the last time you cashed a check into an account with zero balance?
5-10 days is standard in the banking industry, even when you have a large prior balance that could cover the cost of a bounced check.

 

[Jarhyn]

As someone wh has lived below the poverty line, and encountered exactly the problem of not being able to get a checking account... Here's my personal experience:

I was poor, making about 100 bucks a week working at mcdonalds while going to school on a loan. At some point, I got overdrawn on my account, and got hit with about 50 bucks in assorted fees. It was a choice I had to either not have food and transportation, and let a car get repossessed or pay off the fees along with the remainder of the withdrawal which over-drafted me. Of course I couldn't afford the 100 bucks at the time it would have cost to straighten it out. By the time I had the money, though, my checking account was cancelled.

After that, I paid off the remainder, but for the next few years, nobody would let me open account, due to something they called 'checking account credit'. In order to cash my student loan checks to buy supples and food, it cost me 150 bucks.

There are legitimate reasons that poor people cannot use banks.

 

[James Brown]

Why completely free? Because they use the money you store with them to make money for themselves. Why should I also have to pay them for the opportunity to use my money to make money?

It's not as simple as you make it sound. It costs money for banks just to hold deposits--FDIC fees, overhead costs, etc.--and since the interest they can earn if they do lend it out is at historic lows, their profitability is greatly diminished. Even before the financial crisis, more than half of ordinary checking accounts were unprofitable.

That's why Bank of America floated the idea of charging for debit card purchases until the public outcry reached epic levels. "How dare you charge me to get my own money!" went the protests. But that's not what BoA was doing. They were charging people to obtain their own money in a modified form--namely, a secured, insured, plastic form of payment accepted everywhere and that allowed near-instant approval to the vendor. All that infrastructure costs money, and banks aren't going to pay for it unless they can find a way to recoup the losses elsewhere.

If you show up with a weekly paycheck of a few hundred dollars and ask for an ordinary checking account--whether through a TBTF bank or your friendly credit union down the street--the guy filling out the paperwork is thinking that you're going to cost his company money. Too many people like you and the bank may either go out of business or just stop offering personal checking accounts completely. And then where will low-income earners go?

 

[Derec]

No, if you takes longer than 2 minutes to use google to find any banks that do this, that implies that there are very few banks do it, and thus a poor person without computer access or ability to go all over town to find a willing bank would have difficulty finding one. Thus, you are objectively wrong that it is "easy".

Well the options I listed are from the first two bank web sites I visited. If I was researching this for real I'd have spent more time looking at smaller banks as well as credit unions to find the best deal for my needs. Since the article in the OP states that being bankless costs both time and money spending some time to find a suitable bank product seems like a profitable time investment.
As far as Internet/computer access, there are always libraries.

Free, because non-poor people can get free accounts, so if poor people cannot, that means it is more expensive to be poor just like the OP said. Whether they pay the bank to cash a check or a check cashing place, they are paying more to get their check cashed than people with more $.

They pay more because they cost more, as James Brown elucidated. Nothing nefarious here. My point was not that being better off doesn't give you more options than being poor but that being poor doesn't preclude you to have a bank account and also that banks are preferable to the 2nd tier financial system from the OP article even if one has to pay checking account fees.

IOW, you found zero banks that meet the criteria without adding a stipulation of having the kind of regular employment that allows you to direct deposit at least $750 every single month, a stipulation that many poor people could not meet.

Even with fees it's still cheaper and more convenient than check cashing places. And the direct deposit varies from $250 to $750 a month. Besides, I did merely a cursory, two minute, search as proof of concept - I did not exhaust he marketplace. I expect people who shop for banking products to spend some more time on it.

When was the last time you cashed a check into an account with zero balance?
5-10 days is standard in the banking industry, even when you have a large prior balance that could cover the cost of a bounced check.

I did have a rough patch some years ago and even deposited a check into a slightly overdrawn account. It did not take days, in fact, portion was available instantly bringing my account into black. The bank even reversed the $30 overdraft fee.
Maybe it depends on the bank?

 

[Derec]

Why completely free? Because they use the money you store with them to make money for themselves. Why should I also have to pay them for the opportunity to use my money to make money?

You are absolutely right, which is why they can offer free checking accounts if certain conditions are met. If you only keep peanuts in your account they can't work with that and you end up costing them money, necessitating a fee. Also see what James Brown wrote.

If you had any experience with poverty you'd know that what seems like nothing fees to you and me can be crushing to a family in poverty.

My point is that even with fees it's still cheaper that getting nickel and dimed by check cashing etc. places.

- - - Updated - - -

Really, I do all this and they still charge me $15.

May be time to talk to them?

 

[Derec]

Neither of you know what you are talking about. If you're poor you likely have bad credit from unpaid or late paid bills. Banks turn you down for checking accounts with bad credit.

I have never heard of someone getting denied a checking account for bad credit. What happens instead is being blacklisted for having your checking account closed for, as Jarhyn experienced, overdrawing the account and not resolving it in a timely manner.

 

[credoconsolans]

Why completely free? Because they use the money you store with them to make money for themselves. Why should I also have to pay them for the opportunity to use my money to make money?

It's not as simple as you make it sound. It costs money for banks just to hold deposits--FDIC fees, overhead costs, etc.--and since the interest they can earn if they do lend it out is at historic lows, their profitability is greatly diminished. Even before the financial crisis, more than half of ordinary checking accounts were unprofitable.

That's why Bank of America floated the idea of charging for debit card purchases until the public outcry reached epic levels. "How dare you charge me to get my own money!" went the protests. But that's not what BoA was doing. They were charging people to obtain their own money in a modified form--namely, a secured, insured, plastic form of payment accepted everywhere and that allowed near-instant approval to the vendor. All that infrastructure costs money, and banks aren't going to pay for it unless they can find a way to recoup the losses elsewhere.

Perhaps the banks need to stop housing themselves in extremely expensive buildings with great lobbies filled with artwork and nice tile. Perhaps they need to cut back on the salaries they pay their executives.

I'm not feeling sorry for a bank having to pay money to make money. They make much more than they're paying out for overhead, otherwise they wouldn't be in business.