By Ryan Velez
We recently covered how Bank of America is making a change that requires a minimum balance on their checking accounts, something that is being condemned by some as a move against poor people. However, in an article in The Washington Post, freelance writer Karen Weese points out that this is only one of many ways that being poor often costs more.
“It has never been easy to be poor in America, but decisions made in company boardrooms about seemingly modest financial matters — about fees, fines, interest rates, minimum balances — make life far harder than it has to be for low-income families,” she explains.
“Perhaps to the executives who make these kinds of decisions, the fines and fees seem negligible, especially if you, like Bank of America chief executive Brian Moynihan, received $20.2 million in personal compensation last year. More than 40 percent of Americans say they struggle even to make ends meet each month and would be unable to cover an unexpected $400 expense without real hardship. No amount is small if you cannot afford it,” she says in reference to Bank of America’s move. Now, people who use their accounts need to have either $1,500 in the account or $250 in a direct monthly deposit to avoid paying a fee.
To put things in perspective, the median checking account balance for Americans making less than $25,000 a year is $500. As a result, the slightest issue, from an unexpected cost to a delay in pay, could easily put a poor person at risk of those fees. “Once you are overdrawn, you are hit with overdraft fees, typically $35 apiece. You will be charged a separate fee for each individual transaction, and if you are like most people, you will not even learn you are overdrawn for two to three days,” Weese says.
Some may counter, “why not go to another bank?” It depends on where you live. Many poor rural and urban areas don’t have the bank options that other places do, forcing them to rely on a check-cashing establishment that takes a cut of the check. Turning this into money orders to pay bills leads to even more fees.
This doesn’t even mention the costs of housing, food, or other essentials. For one last example, if you can’t afford a security deposit for a place to live, your alternative is a hotel to pay by the week. This costs less up front but will end up racking a much larger bill over time.