
The Real Reason The Poor Go Without Bank Accounts - sfrjay
http://www.theatlanticcities.com/jobs-and-economy/2013/09/why-poor-choose-go-without-bank-accounts/6783/
======
gregpilling
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 my job, even though I'm a fulltime single father, the "child
extort" kidnappers levied my checking account several times. They just took
money at will no questions asked. There was no rules stopping them and nothing
I could do. The Sheriff of Nottingham might as well been barging in me and my
daughters tiny apartment and stealing all of our shillings. So after the
"child extort" agency did this 3 times, I shut down the account. And from that
moment forward I just began to live off the grid using cash and money orders.
"_

~~~
code_duck
I was talking to my girlfriend last night and she mentioned how her ex-
boyfriend doesn't have a bank account. He's actually well off financially, so
I wondered why. Indeed, the answer is to avoid wage garnishment for child
support.

~~~
rwmj
I wonder what the mother and child think of this arrangement?

~~~
code_duck
I presume they wish the state had more effective means to redistribute the
deadbeat's assets.

~~~
eriksank
Is it even his kid? It could also be the "works" of the new boyfriend ;-)

------
Amadou
This article validates one my key beefs with "big data" \- databases (like
chexsystems in the article) remove slack from the system. Humans need slack
and only humans can provide slack.

In the short term that may seem like a good idea, removing slack appears to
increase efficiency. But in the long run it is socially destructive -- we are
all people, not just numbers and reducing us to numbers ignores much of the
realities of life. When you can't take into account the realities of life,
then the imperfect systems that the databases model as perfect fall apart.

~~~
fauigerzigerk
I generally agree with that, but there is a potential downside to it as well.
The slack that humans will cut you is not a right, so it can be taken away at
will for completely arbitrary or malicious reasons such as stereotypes against
particular groups or even because you didn't bribe a particular offcial.

I'm still convinced that your point is correct, but it only works in
combination with the utmost transparency.

------
belorn
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 taking out _" that
much cash"_. Only if the bank approves of your reasons to withdraw money will
you be able to do so.

All withdraws are of course logged, stored, traded and given away for
inspection. I can also be held, for any reason the bank can think of or from
outside pressure (like the Wikileaks visa scandal).

I fully understand why more and more people chose to avoid banks. Banks are
services. If you voluntary give away your money to be owned and controlled by
a third-party, they will indeed do so.

 _corrected: month - > week_

~~~
RougeFemme
In the U.S. you don't have to give a reason for taking out your cash (though
withdrawals over a certain amount are reported to the Feds). But there _are_
ATM limits. I always assumed - perhaps naively - that the reason was to keep
the ATM from running out of cash too quickly, thus minimizing the cost of
replenishing them. And occasionally, on 3-day weekends, I have seen more out-
of-order ATMS than usual. . .presumably because they had run out of money.

~~~
emidln
In the past (I haven't tried recently), a call to customer service could raise
or remove your ATM limits.

------
jlgaddis
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 wander in and out of the store but mostly linger in the parking lot,
chatting with others in their large group, and simply trying to entertain
themselves, in general.

Naturally, I asked him why they would do this. Apparently their government
"checks" are now "deposited onto their card" (a debit card, basically) at
exactly midnight on the 1st of every month. They know that at 12:01 a.m. on
the 1st, their money will be available and so they hang out at the gas station
in anticipation of being able to load up on cigarettes, basic groceries (more
expensive than a typical grocery store, of course), lottery tickets, and such.

~~~
khuey
This is a pretty well known phenomenon.

[http://www.npr.org/2010/10/02/130272928/midnight-shopping-
on...](http://www.npr.org/2010/10/02/130272928/midnight-shopping-on-the-brink-
of-poverty)

------
rayiner
I'd imagine another reason is they need the certainty of having their money be
there. My wife had an account she didn't use since college, and apparently she
fell below a balance limit and they charged a $5 fee, which overdraw her and
turned into a $35 overdraft charge. Inconvenient for us, potentially a
disaster for someone scraping by.

~~~
jlgaddis
I had the same thing happen several years ago when I moved. I changed banks
and left my "old" account open with ~$18 in it. I completely forgot about it
until a few years later when I received a letter telling me they had closed
the account and I owed them $9.

------
Geee
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.

~~~
bobf
Electronic ACH is often used in the US, which is basically the equivalent to
an electronic check. Actual wire transfers usually have fees associated with
them both to send and receive (~$25), and are thus more rare.

~~~
superuser2
Not _often_. Harris Bank doesn't even let you initiate an ACH transfer from
the website; you have to call or go in.

Much of Europe pays for POS transactions with free, fast bank transfers from
their smartphones in lieu of credit and debit cards. No checking account,
routing number, and 3 business day verification crap.

------
patio11
Some reasons which are cited in the literature, of which there exists lots
([http://www.kansascityfed.org/publicat/research/community/Unb...](http://www.kansascityfed.org/publicat/research/community/Unbanked.Report.pdf)
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 a little low, $300 vanished in fees, my rent check
bounced and I _got arrested_ for 'uttering.'").

2) Banks have some assumptions made about their customers which are
institutionalized by practice and sometimes regulation or policy. These
assumptions map fairly well to the middle class but sometimes don't travel
well. Here's four things I could tell you about an adult member of the middle
class: they're literate, have a primary address which changes relatively
infrequently, carry identification with them, and do not fear speaking to
Authority because they're not cognizant of a reason why that should result in
their immediate arrest.

3) "Free checking" was a multi-billion dollar ongoing wealth transfer from
poor bank customers to banks and relatively wealthier bank customers. ("Free
checking" was a marketing tactic very popular in the 90s and early 2000s where
banks eliminated monthly fees for checking accounts while slashing minimum
balances to open them. The flipside is that they then started cranking up fees
generated by e.g. overdrafts. This combination generally tends to not be to
the benefit of (many) poor people.)

4) The alternative financial sector has a product mix which more closely
matches poor people's needs than traditional banks. For example, short-term
loans for small amounts of money available with minimal documentation required
are a) astoundingly high risk, b) relatively expensive to process, c) have
fairly low margins, and d) carry explosive reputational risk. These counsel
against the typical retail bank even trying to offer them. Much better to loan
a middle class American $8k out of a credit card limit of $20k at 12% with a
3% loss rate then to loan a poor person $100 with $110 due a week later. (If
you APR-ize that it becomes "A number which one never, ever wants to get asked
about when you're called to testify before Congress about how you're causing
poverty in the community you serve.") Business thus flows to the alternative
financial sector.

5) (The literature is a bit circumspect about this one, but it's there.)
Sometimes poor people make decisions which, if you appreciated their limited
options, individualized viewpoints of the world, and the sociocultural context
and structural issues at play... are still very effing bad decisions.

~~~
bilbo0s
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 a
prepaid card gives her everything she needs with little of the risk. And so
that's what she does. It's not a "check cashing place" or "payday loan" place,
but it is one of the places siphoning the poor from the banks. (My guess is
that it's probably siphoning a lot of them too).

I think sometimes it's a little easy to lose sight of that single mother with
three kids working a low end job. She really can't afford fees like that...
though the fees may sound trivial to the middle class. When she gets home, she
HAS to have food for her children. And among a lot of what you might term the
"responsible single mothers", anything that would put their ability to do that
at risk is, rightfully, eliminated.

Bank accounts, in their current form, are on the list of things that can put
that at risk. And so, bank accounts are eliminated.

After that conversation, it was not clear to me that she had made a bad
decision. I couldn't really question her priorities. A bank account was good
for me... but maybe not for her. This is why I think that these sorts of
decisions will be made more and more often by the poor. Because they only care
about the ends, (feeding her kids). Not the means, (the bank account).

I guess I'm just saying that...

It wasn't clear to me that it was an... "...effing bad decision."

~~~
steveklabnik
> (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 the day, I bought
lunch, a snack, and some pencils or something. All that total was less than
the $20, it was something like $10 for lunch, $2 for the snack, and $5 for the
pencils. So I was good.

I wans't good. They applied the charges like this:

    
    
      Starting Balance: $20 
      WoW:             -$15 
      ---------------------
                        $ 5
      Lunch:            $10
      ---------------------
                       -$ 5
      Overdraft fee:   -$35
      ---------------------
                       -$40
      Snack:           -$ 2
      ---------------------
                       -$42
      Overdraft fee:   -$35
      ---------------------
                       -$77
      Pencils:         -$ 5
      ---------------------
                       -$82
      Overdraft fee:   -$35
      ---------------------
      End total:      -$117
    

Now, what sucks is that if they had processed them in a different order, it
would have looked like this:

    
    
      Starting Balance: $20
      Lunch:            $10
      --------------------- 
                        $10 
      Snack:           -$ 2 
      --------------------- 
                        $ 8 
      Pencils:         -$ 5 
      --------------------- 
                        $ 3 
      WoW:             -$15 
      --------------------- 
                       -$12
      Overdraft fee:   -$35
      ---------------------
      End total:       -$47
    
    

Still an expensive mistake on my part, but it's more subtle than 'made a bad
choice.' I was able to convince the bank to refund two of the fees so I was
only out $40, but that extra $70 was a _massive_ amount of money to me at the
time. It basically meant that I could only exactly squeak by for the next
month, since that was basically all of my discretionary income. You can
construct a similar situation which would have forced me to then take out a
payday loan to make my bills, had I made one or two more mistakes in that same
timeframe.

~~~
dobbsbob
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 since I
didn't have overdraft. What they did was wait until 11:59pm the day before I
was to be paid out $800 direct deposit from my pitiful p.t job and the bank
allowed it to go through, then charged me interest on the negative balance for
those few hours where they overdrafted the account.

I woke up to -$280 in my account in overdraft fees and the theft of my money
from that telecom. Being that I couldn't feed myself 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 until finally got my money back from those assholes. I closed my
account after that and asked to be paid out in cash from my job instead.

~~~
rmc
_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.

------
sdolan805
My friend had $150k in his bank account that was taken by the IRS while they
were still in negotiations on a huge tax bill. No notification, no nothing. He
only found out after he was trying to buy groceries and his card was declined.

After it was all said and done he ended up owing the IRS ~$14k and they gave
him a check for the difference, but it took months to get it all sorted out.

I lent him some money to get him through it, but what if he didn't have a
friend to do that? He'd be kicked out of his apartment and starving.

Now he doesn't trust banks (not that it's the necessarily the banks fault). He
keeps around a thousand in his bank for emergencies, and keeps the rest in
cash (at an undisclosed location :)).

It goes to show that even people with a reasonable amount of money have
reasons to keep their money out of banks.

~~~
JEVLON
I heard of a guy that did that and his ex girlfriend told her new gangster
boyfriend (real gangster) where he kept the money. It's probably safer to keep
your money in the bank.

~~~
NovemberWest
It is generally safer to not tell your secrets to people who have reason to be
vindictive. If it hadn't been his stash, it would have been something else.

------
rdtsc
I can understand this. My mother in law was sick for a while and in a hospital
for a few months. During that time she was late on one of her mortgage
payments, which she as been faithfully paying for 2 decades. She also took an
equity loan to remodel her house. Because of the missed payment they cancelled
her equity loan. She went to the bank to talk to them hoping they would
understand, but all he heard was how his "hands were tied". She tried telling
them she was a customer for years, she had a number of accounts with them,
mortgages, car loans from the past, she even paid extra on her mortgage
payments often. She explained her medical condition hoping they would
understand, but all to no avail. He kept hearing about how all these rules and
triggers are automated in the "system" and nothing could be done.

She lamented the time when banking was a personal experience just like the
article wrote. You went your teller, you'd known for years, they'd ask about
your kids. The manager migth know you, might send you a birthday card and so
on. I can see how she would be a person willing to pay $5 per check just to
get back that personal touch.

The article also touched on this, but many people who are poor also don't
happen to see a lot of human kindness, sometimes fake customer service
kindness is better than nothing, they don't even mind paying extra to get it.

~~~
waterlesscloud
Stop banking with big banks. Go local. When my brother started his business,
he moved all his banking to a local bank, one that had only one branch, which
was downtown in his town. He's built a personal relationship with them, and
the flexibility it's given him has paid off in spades over the year.

There's no reason to pay some megacorporation to treat you impersonally.

~~~
teamonkey
Cost. If I bank with a large bank I can use their network of ATMs for free.
With a smaller bank I can't withdraw anywhere other than my branch without
incurring a ridiculous $3-$5 charge.

~~~
sparky
Many credit unions are part of a large co-op with lots of no-fee ATMs all over
the place ( [http://co-opatm.org/](http://co-opatm.org/) ). You can also
deposit checks/cash at many of these ATMs. They may not be on every street
corner like major banks are in some cities, but chances are there's one near
you. Some of those credit unions will also reimburse all your ATM fees if you
use your debit card a certain amount (for mine, it's 12 transactions per
month).

~~~
a3n
Yes, credit unions are an excellent middle ground between mega banks and local
small branch banks. Just use one that's part of a co-op and _most_ people
won't have any problem at all. YMMV.

------
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.

~~~
a3n
Anecdote of one: I bank with Wells Fargo, I go inside the branch less than
once per month, and I rarely see the same tellers or "bankers" (the ones that
sit at a desk) from visit to visit. I think it's pretty high turnover. I don't
know the reason, but I suspect it's because the bank is trying to sell me
services like insurance, and there's pressure on bankers to make sales. It may
also be because a teller or banker job is a young person's first career-like
job, from which they move on and up as soon as possible.

In fact I hate it when I have to talk to a banker, I get annoyed when they try
to sell me services that have nothing at all to do with what I went in for, or
with why I'm a customer in the first place.

Also, I suspect because of turnover, they usually can't answer my questions
when I ask. They just do not know the answer to "how do I do this particular
bank-like thing" without researching and asking the branch manager. But man
they do know all about their insurance products.

------
bluedino
Don't forget that in poor areas, there aren't many banks. When you're in the
suburbs there's a bank on every corner. Even trying to find an ATM in the part
of town I work in can be a challenge. They recently built one and it has so
many lights an mirrors around it, it seems a bit silly.

I'm not sure what the banks use to determine whether they open/close a certain
branch. Everyone jokes that 'The First National on MLK Boulevard got robbed
twice a month so they shut it down', but I'm sure there's some real process
with population density and more importantly, income density.

When you cash your check at a liquor store, two things happen - you end up
buying things like food for your family (as well as beer + cigarettes + lotto)
and they take a % cut. The bank doesn't have anything for you to buy and they
don't take a cut.

This also means the poor can't pay their bills online. Again, in the bad side
of town on Fridays and on the 1st and 14th of the month, there are massive
lines outside the power company, city water department, and cable company.
Everyone's standing there waiting to pay their bill in cash. While the rest of
us pay everything from our smartphone or have it directly taken out of our
accounts, they're spending two hours in line during the day.

------
byuu
When I was 19, I tried to open a checking account. Amazingly, I was declined.
For a bank account. I didn't ask for credit, in fact I had no credit history
at all. I was apparently so unworthy that they didn't trust me to give them my
own money. I never understood that, as I figured they'd just bounce a check
anyway if I lacked sufficient funds.

I'm much older now, and have a bank account, mortgage, credit cards, and all
that jazz. Just a silly anecdote that it's actually possible to be too poor to
be allowed to have a bank account.

~~~
DanBC
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 paid to them. These accounts don't allow debt; don't have
credit or debit cards. (Except HSBC I think does issue a debit card with its
basic account and other banks probably do to?).

~~~
gambiting
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.

~~~
xioxox
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.

~~~
gambiting
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?

------
aperture
Currently, I'm interning at a well known banking wealth management company,
and I find the rich like to have the same environment.

Birthday cards, get well soon cards, calling the client and asking how they
are, helping them with last minute account stuff (like making their visa have
a higher cap so that cruise trip can be insured).

I think a lot of banking should be like this. I doubt it ever could be, as
most banks have very few people, but specialized areas, like this rite-aid, or
some wealth banking, have the time to dedicate to these people.

Treating people like people, whether it is restaurants, or banking, or
anything, makes a business less like a service and more like an experience. It
should be something a lot of startup companies on hn should look into.

~~~
smm2000
I think that most middle class people just do not need any personal services.
I understand why rich need it - they have complex finances with multiple
sources of income, bank accounts in different countries, tax management needs
etc. Poor also may need it - bounced checks, cashflow problems, lack of
understanding of financial products.

But finances for most middle-class people are plain vanilla - one or two
checking accounts, credit card, simple mortgage. They do not live paycheck to
paycheck so no bounced checks. There is not much space for personal
interactions, especially profitable ones. Get paycheck every two weeks, pay
all the bills, move whatever left to investment account. The last time I was
in the bank was three years ago to do international wire transfer.

Good analogy - when I was poor student with crappy car that was constantly
broken, mechanic was important person in my life. Car repair expenses in some
months were bigger than my monthly budget and having rapport with good
mechanic was important. Now I have newer car that pretty much never breaks and
I do not give a damn who changes my oil as long as there is Starbucks nearby.

------
blahedo
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 involving a mis-typed amount in an online
transfer, basically all my fault, but everybody was on my side and it got
resolved quickly and easily---and all over the phone, as I was several
thousand miles away from home at the time!

~~~
laaph
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.

------
a3n
To all those who state that it's irrational to be non-banked, remember two
things:

1) Just as all the world is not a Vax, all the world is not you and your
circumstances and acquaintances and anecdotes.

2) as the article briefly touches on, many people simply cannot get a
traditional or even minimal/basic bank account because of entries in
ChexSystems. These entries may be correct and current, or they may be old, or
inaccurate, or not reflective of current circumstances. And banks are only too
happy to outsource the expensive process of judgment and "knowing their
customer." No banker ever got fired for following ChexSystems' recommendations
(I assume).

------
thaumaturgy
HN is so cute. So many people here talking about why poor people do things the
way they do without having ever really experienced it.

Here's why poor people don't like banks: because banks don't like them.

Let me paint you some pictures.

You're not clean-shaven. You smell a little bit, whether because you just
finished a smelly job or because you're living on the streets or because
you're depressed and haven't bothered to clean up in a day. You enter the
bank, and no less than four pair of eyes look at you -- eyes that are
surrounded by expensive haircuts, ties, and nice dresses or suits.

You're exhausted and you can't concentrate well. Maybe it's the chronic lack
of sleep, maybe it's malnutrition, maybe it's stress, or maybe it's drugs or
alcohol. You walk up to a counter with a check in hand. This paper is
worthless to you, what you need is a different kind of paper that you can
trade for things you need.

The teller asks you if you're a customer. She's polite, but polite in that
barely perceptible condescending way that people are when they're
uncomfortable with the person they're talking to.

You're not a customer. She'll have to charge you for cashing the check then
(or maybe won't do it at all -- depending on company policy).

Can you be a customer? She directs you over to a desk. The desk has a nice
finish on it. It's probably worth more than anything you own. It might even be
worth more than everything you own.

You sit down at the desk and another person with a polite smile, perfect hair,
and a nice tie or suit or dress asks you for some personal information and
enters it into the computer.

You're poor, so you _hate_ computers. They keep track of you everywhere you
go. You can't seem to escape them. The police in different towns all somehow
have access to the same information about you. Computers produce paperwork
that occasionally makes it into your P.O. Box, or last address, or friend's
address, and usually it's bad paperwork: more bad news, more stress, more
trouble. Some faceless agency somewhere wants more of what you don't have.

This computer is no different. A few keystrokes later, the representative
apologizes in that polite-but-condescending way: "I'm sorry, you're here in
Chex Systems for account abuse at BigCorp Bank three years ago, we can't open
an account for you."

This is the sixth bank you've been to.

Three years later, after a little bit of luck and a lot of hard work and a
struggle that will forever leave a scar on your soul, you've finally reached
the five-year expiration period for Chex Systems, you've finally got a regular
job with a regular paycheck that is just barely enough to live on. You're set
up with free checking at some bank, but you're very very careful not to
overdraw your account, ever, because that one time you did it suddenly somehow
turned into $250 of money that you owed the bank -- money that you didn't
have, because if you did, the bank wouldn't be asking for it.

But this morning, your beater car finally crapped out for good and the low-
rent apartment complex you live in forbids you from working on it in the
parking lot. You can't get to work without the car. You have a little bit of
savings, about $100, and you just need to borrow a little bit of money so that
you can get another beater and get back to work as soon as possible. Your job
doesn't offer paid sick days, so every day you're out of work, you get a
little bit poorer.

You walk or get a ride down to your bank and you sit down behind that desk,
and that computer that you still hate, and you ask the polite-but-still-a-
little-condescending nicely-dressed person if you can get a car loan. You
quickly add, "I don't need much, only a few hundred dollars, and I'll be able
to get this car I saw down the street from my apartment." You make promises
and tell the representative how important this is to you, because you're under
the mistaken impression that the representative has the ability to make a
decision. But it's not up to them, it's up to the computer.

The representative politely tells you that they don't do car loans for a few
hundred dollars, they only do loans for a couple thousand. You don't need a
couple thousand -- in fact, the very idea of borrowing that much is really
scary to you, because you're pretty sure that if somebody gave you that much
money you'd mess up with it, just like you always do, and then you'd owe _a
lot_ of money that you'd have no way of paying back.

But the representative tries to get you a couple thousand dollars for a car
anyway. The computer says no: you don't have enough credit, your credit is too
bad, you don't make enough, you don't have collateral. In short: you are too
poor.

It doesn't matter that you're a customer. It doesn't matter how hard you're
_trying_. It's just like all your friends say, it's what you hear all the
time: banks only lend you money if you don't need it.

\--

That was me. For years. I'm reasonably intelligent, I've never had a drug or
alcohol problem. Still, though, I made a relatively simple decision many years
ago, to take a vacation from the computer industry for a while and be a
climbing instructor. Unfortunately, while being a climbing instructor was
amazing and I'm still glad I did it, it didn't pay very much, and eventually I
got into trouble with a bank.

The economy started to have trouble then (dot-com bust), my computer skills
were more of a liability than an asset, and for the next several years I
struggled desperately to keep my head just barely above water. I was homeless
for a while.

I've got my own business now and my finances are better and I _still_ hate
banks. I love the people at my local bank, but I hate banks.

~~~
readme
Before I was a developer I was poor and worked as a busboy and a dishwasher
for several years.

At one point I mismanaged my finances and completely destroyed my credit
score, as well as getting listed in chexsystems for overdrafting a bank
account and not being able to pay them back for several months.

To cash my paychecks (I got paid mostly in tips), I used a check cashing place
or the grocery store. I did this because being listed in ChexSystems prevented
me from opening a bank account.

Once I became I developer I dug myself out of debt and then rebuilt my credit
score. Eventually after waiting long enough I was able to get a checking
account from a bank that used FICO scores instead of ChexSystems.

The article is a bunch of crap. It reads just like that nickel and dimed book
by Barbara Ehrenerich[sp]. How an academic cannot figure out that the reasons
these poor people are giving for not having a bank account is false? There is
one reason: they are listed in ChexSystems and can't get an account.

~~~
thaumaturgy
Well, I think the article did get one thing right, something that many
articles about poverty don't, and that's the kinship and us-vs-them attitude
that tends to be a factor in decision-making among the poor.

Check cashing places are a lot less formal than banks (when formality is
intimidating), and they tend to say "no" less often. They're more of an ally
to the poor than most people would think.

But, yeah, the article should've mentioned Chex Systems.

------
rm445
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 enough. But the avoidance of overdraft fees may be the key. When
paper cheques have had their day and every non-cash transaction is software
talking to a bank server, there will be no need for unarranged overdrafts to
exist for every bank account. Accounts that carry no risk of unplanned fees
would be a disruptive innovation, given that retail banks seem very addicted
to the profits from overdraft fees.

~~~
gambiting
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 actually left my account the price of euro
changed and I was charged slightly more, putting me a few Zlotys under zero. I
just quickly paid in some money to my account and there was no fee for that.

So how does the bank make money off me? It must be by investing the money they
keep for their customers,because I certainly am not paying them anything. I've
had an account with them for the last 5 years, and paid exactly $0 in fees.

~~~
coolnow
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.

------
wavesounds
TLDR: Check cashiers have better customer service and (anecdotally) less
stupid fees.

~~~
muzz
Unmentioned in the article: New York has strict regulations on check cashing
that limit fees. Roughly 2%. Only a few states do this, some limit it at 5%.
The check cashing business is _very_ different in those states that don't have
such limits.

------
guelo
Banks have been continually inventing and raising fees on unsuspecting middle-
class customers for decades. I wouldn't be surprised if banks made more fee
revenue per customer than check cashers.

~~~
r0s
Absolutly. Looking for an alternative a few years ago I found a check cashing
place that would simply stop payments before a transaction, so you couldn't
overdraft.

I was happy to pay 1% fees on check cashing for that; with low income that was
quite reasonable.

Direct deposit had no fee, and this was a great deal for me.

------
EwanG
So basically the check cashers have become more like banks, and folks who are
short on human interaction value that more than the extra couple bucks a
monolith that pushes you to an ATM (that may charge you extra for your
withdrawal as well) costs.

Wonder if any banks will see this as a proper wake up call...

~~~
Symmetry
What banks can do is pretty tightly regulated and I wonder if it would be
legal for a bank to handle the overdraft situation in the aritcle the same
way, with deducting a fee from checks cashed over time.

~~~
maxerickson
Banks have significant flexibility. Capital One 360 (the former ING Direct)
handles overdrafts by providing a line of credit. The fees there for short
term over drafts are a few cents.

~~~
dylz
I'm actually somewhat curious, why does CapitalOne fuck everyone in their
"traditional banking" over, but generally not screw with [ex?] ING Direct
customers?

~~~
philwelch
We have very high standards and would immediately abandon CapitalOne in droves
if they fucked with us.

For years whenever people complained about banks I always said "ING Direct
isn't like that". So far CapitalOne hasn't wronged us yet. I suspect it's
because they just bought out the business and the same ING Direct people are
still running it, and the CapitalOne people know to leave well enough alone.

------
mikeash
I thought this article was fascinating and made me think about all of this
stuff in a completely new way.

I'm much like the author. I bank electronically. I actually just visited a
physical branch today for the first time in months because I had a big wad of
cash to deposit, and mobile phone deposit technology hasn't quite reached the
level of sophistication needed to handle cash yet.

My relationship with my bank is generally simple. They store my money, and
occasionally pay it out or receive more. This is almost all automatic. The one
thing they do that might actually involve some effort is the bill pay service,
where they will actually mail a physical check in some cases. But most of the
payees I have set up in their system have electronic arrangements.

When I need further service, they're good about it. They answer their phones
quickly, they can overnight a cashier's check for a reasonable fee on the rare
occasions I need something like that, and they'll call me if something looks
like fraudulent activity. But this comes up once a year or less.

For the most part, they're basically another appliance for me. We have defined
roles and we stick to them. I keep a generous pad of extra cash in the
account, never overdraw, never need anything weird, and in exchange, they
charge me no fees, even pay me (extremely nominal) interest, and don't hassle
me.

This works great if you have the responsibility and cash to do it, but it
would fall apart if I didn't. If I started cashing bad checks and
overdrafting, I'd get hit with fees up the wazoo and I'd pretty much have to
leave. Features that are an extreme convenience to me now, like totally
automatic bill pay, would become a huge liability.

I looked at these places and thought that they offered less service. They
don't even keep your money for you, after all! And they charge you for the
privilege! But, to their customers, they offer _more_ service. They offer more
control over their customers' money. They offer more flexibility and less
punishment when bending or breaking the rules.

It's a good lesson in not just assuming people are dumb or ignorant. Sure, a
lot of people are, but when behavior is this common, there's usually a good,
rational reason behind it.

I always thought that if I was poor, I'd still be "smart enough" to bank
properly with whatever money I had. Now, I wonder if that really would be
"smart".

I also wonder about financial regulation. I generally favor a "better safe
than sorry" approach there, but this might illustrate a downside of that.
We've all heard about the trouble that non-traditional companies have had with
such regulations, whether it's companies like Paypal, or Simple, or Bitcoin-
related businesses. They try to get around the regulations in various ways.
Here, RiteCheck is getting around banking regulations by simply not being a
bank. I have to wonder if they could offer better service _and_ some of the
sort of safety and savings ability we associate with normal banking if it were
less difficult for RiteCheck to offer something like an actual bank account.

------
antoncohen
For those in San Francisco the city/county government has setup "Bank on San
Francisco" to help people use regular banks instead of check cashing places.
They have partnerships with banks that allow people to get bank accounts even
if they have had trouble in the past.
[http://www.bankonsf.org/](http://www.bankonsf.org/)

Bank on SF also has a small dollar loan program called Payday Plus SF. Their
partners offer payday loans at reasonable rates (max 18% APR).
[http://paydayplussf.org/](http://paydayplussf.org/)

I know they don't address a lot of the issues the article brought up, but they
could be useful for people in certain situations.

------
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.

------
qwerta
Maybe it is because the services sucks as well. American banks are decades
behind Eastern Europe, Russia or even Africa.

Just basics: account where 'overdraft' is not possible (account can not go
into minus). Debit with low (5%) interest can be arranged separately .

My bank had mobile banking in 1999 (simtoolkit & SMS). In 2002 mobile banking
become free!

Credit card fraud? How about white-listing expected transactions over the
internet? How about setting up your own filters?

------
innino
Shit articles like this make me feel lucky. I don't come an extremely wealthy
background or anything but reading this sort of stuff makes me feel like a
life-assets superstar. I have to say it makes me appreciate my bank/national
banking culture:

1) I can ask for an overdraft limit of up to $2000, which if I draw into I pay
a $3 monthly fee for. 2) I have a credit card which I can easily ask for a
limit up to $5000 if I ever need that sort of temporary cash (I don't.) 3)
Everything is done with banking cards here - balances update automatically,
only credit cards have weird lags with responding to transactions.

Recently I dropped my OD limit to $200 to try and improve my financial
hygiene. I didn't watch my transactions and a small weekly automatic payment
pushed me past my arranged limit. Talked to the bank and they explained in
that case I would pay one $15 fee per month for any number of unarranged ODs.
Seems pretty lenient compared to the American situation... but they never
charged me the fee anyway!

------
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.

------
elnate
Reading this it sounds like there is a non zero minimum amount you're allowed
to have in your bank accout. Is this true? I've never heard of such a thing in
my country.

~~~
thyrsus
In the U.S., banks can charge you a fee for having less than an agreed amount
in the account. They're required to tell you in advance what that minimum
amount is (and it may be $0), but they're free to set their policies at will.

~~~
eriksank
I wouldn't mind the banks so much if they did not lobby the government all the
time to stamp out alternatives to their abysmal service ...

------
bgilroy26
It's a tough situation, it has a lot to do with momentum. If these check
cashers had profitable local ventures to invest in, they could hold deposits
and pay out interest.

Because there isn't a lot going on in the area, a deposit/commercial bank
isn't interested in the area and in turn, business people in the area do not
have as many local sources of capital.

In place that need it, entrepreneurship would lead to a rise in saving.

~~~
notahacker
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 accounts with constant withdrawal
demands, and their customers are far happier paying a fat commission to get
cash than now than a bank account fee to get it later.

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

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

------
RougeFemme
I've never been with a traditional bank, even though I've always been able to
afford it. I prefer credit unions. I can get all of the "bank-like" services
that I need at a credit union and I have the satisfaction of knowing that I'm
not further enriching a bank CEO.

------
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?

------
RexRollman
That's why Walmart has jumped into this. There is a lot of money to be made.

~~~
maxerickson
It isn't even that strange. Grocery stores have provided check cashing
services for decades.

~~~
protomyth
Walmart went a bit farther and teamed up with American Express on their
Bluebird card.

[http://www.walmart.com/cp/Bluebird/1099170](http://www.walmart.com/cp/Bluebird/1099170)

------
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...

~~~
r0s
> 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.

That's easy to do if you're not poor. It's a problem you've never encountered,
so don't pretend your virtue protects you.

Obviously 'punishing' those with no money does nothing. It certainly doesn't
prevent overdrafts. The only sane response to this (correctly identified)
cycle of poverty: "inability to plan is probably why they're poor in the first
place..." is education and help.

Your attitude is the pinnacle of intellectual void and laziness.

~~~
morgante
> That's easy to do if you're not poor. It's a problem you've never
> encountered, so don't pretend your virtue protects you.

I didn't always have money. My father is a carpenter, and I definitely took
the time to write down every expense back when there was serious risk I might
overdraft.

However, I must apologize for phrasing my original comment too harshly. People
don't deserve poverty, but what I meant was that they're at least partially
responsible for their situation.

As you rightfully point out, punishment certainly isn't the answer. (I
certainly don't see overdraft fees as a sane punishment.)

But payday lenders and the like aren't the solution either. The solution is
helping everyone to get the necessary planning skills for the modern world
through education. It'd be great and truly refreshing to see a bank which
tried to do that (obviously they'd have to find a different business model
than the usual).

So, help people to learn to plan. Don't excuse not planning and the
institutions (check-cashers, etc.) which enable it.

~~~
eriksank
Life itself may not go according to plan. Not everybody is a civil servant
safely working for an otherwise over-indebted local city council. Other people
could get fired from their jobs, the company could have packed their bags and
moved to China, or their own business could have gone bust, and so on.
Whatever happened, in those circumstances, the fact of having money in the
bank does not help, because they will just arraign that money too. More often
than not, related to what happened in your life, they will just seize the
balance. And now you can no longer pay for the rent nor the food. So, you may
end up homeless in the streets, unless somebody helps you. That is why I do
not save money in the country that I happen to live in. It is much harder to
attack a foreign bank account -- how can anybody know it even exists -- than a
local bank account. So, I never trust local bank accounts. Whenever things go
wrong, that thing will inevitably go wrong too.

