10 ms·

It’s expensive to be poor

79 points by dlubarov 11y ago

cLeEOGPw 11y ago
Paywall.
- dima55 11y ago
  Turn your javascript off already. Makes everything better
  - rjaco31 11y ago
    Uh? I have Javascript off, and all I see is a giant footer on this page.. http://i.imgur.com/NodrsQH.png http://i.imgur.com/NodrsQH.png
- pentestercrab 11y ago
  Paywalls with workarounds are OK; paywall complaints are off topic. Please see [1]. 1: https://news.ycombinator.com/item?id=10178989 https://news.ycombinator.com/item?id=10178989
  - mahouse 11y ago
    That's the most stupid thing ever.
IshKebab 11y ago
A lot of this is specific to the US. For example UK bank accounts are nearly all free, no matter how much money is in them. 99% of cash machines don't charge for withdrawal no matter which bank you are with.
- djhworld 11y ago
  Maybe, but we still have a scourge of payday lenders.
- eru 11y ago
  UK banks are the scum of the earth. They charge you for everything. Especially bad are standing orders when you don't have money in your account. German banks (as a counter-example) just won't let the transfer go through. British banks charge you 25 quid. Weren't British banks even recently ordered by their regulator to be less evil with their fees?
  - jbb555 11y ago
    What? I've had various UK bank accounts for years and I don't remember every being charged anything at all. Except for a few one off things like same day payments to buy a house, that kind of thing.
    - DanBC 11y ago
      Free banking in the UK usually means "free banking for a set of services, so long as your account is in credit". Large charges on people who inadvertently went overdrawn by less than £10 for less than a day have been a problem for many people in the UK. HSBC changed from a £25 fee each time the account went informally overdrawn to a £5 per day each time the account went overdrawn. http://www.telegraph.co.uk/finance/personalfinance/bank-accounts/11036692/HSBCs-new-5-a-day-overdraft-explained.html http://www.telegraph.co.uk/finance/personalfinance/bank-acco... Submitted article is talking about poor people. Budgeting is tough for poor people, and penalising those poor people because they are in tiny amount of debt for less than 48 hours feels unfair.
      - eru 11y ago
        On a single day the banks ordered the outgoing transactions from biggest to smallest, making sure the maximum number of transactions hit the 25 GBP fee. (They had some really crappy excuse for that, too.)
  - buffoon 11y ago
    UK here. Haven't had a charge ever on HSBC since I opened my account 11 years ago. And before that no charges on NatWest back to 1989. Depends how you run your finances.
- gmac 11y ago
  UK bank accounts are nearly all free Which is great, except they make a load of their money from hefty overdraft charges (per the article), which means the poor cross-subsidising the rich.
  - iofj 11y ago
    Well when the banks lost the ability to invest due to QE, first in the US, then in Europe, the money to pay for providing bank accounts had to come from somewhere else. Frankly, this is explicit government policy. Hell, QE is so ridiculous. What it effectively does is that it gives government more control over the economy. The QE money guarantees the government money that "it has to pay back" but doesn't pay interest on. In other words, the government believes (and may be right) that this money never needs to be paid back, and this is what's subsidizing government spending at the moment. Effectively a tax on the monetary base instead of on other things like assets (tax the people who only have money to the benefit of those who own houses, stocks, bonds, ... that sort of thing. And this is done without explicitly charging them anything). Currently, every European is paying 120 euros monthly to subsidize banks and stock/bond prices. They are going to keep doing this "for 2 years" (after that, the theory is, governments are going to be offered more free money and say "no thank you, I've had enough". In other words, fat chance). By that time every European will have paid 3000 euros to push up stock prices, the vast majority does so without owning stock, so it's just a cost for them. (The US poor have paid 8333 per-person over the last 4 years to create the current bubble in stocks, house prices, bonds and so on. Currently they're not paying anymore. Note that the stock market is doing very badly. Expect the housing market to crash shortly) Now you might think that you haven't lost any money, and that's true, you've lost value. Those 8333 you paid over the last 4 years mostly went to funds with the purpose of making houses more expensive. Making stocks more expensive, and the like. So you haven't lost money ... well no, you haven't. You've lost part of the ability to buy houses, stocks, cars, bread, ... But don't worry ! The official statistics show no loss of purchasing power (they did take out gasoline, cars, houses, ... you see when those things got expensive, a lot of people stopped buying them. So "it doesn't make sense to have them in the consumption index anymore". Great, and might even be accurate, but let's not pretend this remains a useful metric to compare the wealth of the average American to 20 or even 10 years ago). And this is explicit government policy. It's not like the ministers and so on don't know this. The net effect is to let the government control slightly over 50% of economic activity, which wouldn't be sustainable otherwise. So they make sure the extra taxes are well-hidden.
- natmaster 11y ago
  When I visited London and withdrew money from my US bank account the London bank charged me a lot, but my US bank charged me nothing.
- Asbostos 11y ago
  I've never seen a country with more horrible banks than the UK. They get their profit from poor people. They make it easy to accidentally overdraw and then charge you a massive fee. Don't pay the fee in time and you get another one because the fee kept you in overdraft. They also won't give accounts to just anybody. You need a letter from your employer so you can't open an account if you're unemployed. Even with that, you have to wait a couple of weeks for an appointment to talk to somebody before they open your account. My T&C even made it a requirement for my account to receive a regular minimum deposit each month. The phone staff are rude and unhelpful and the branches are usually closed when people need them the most (mornings and evenings) so the few useful times they do open (Sat morning), they're overcrowded and people end up missing out. This is a failure of the market though. People want free, so the banks have to provide free. But they also have to make money, so they only option is dirty tricks. A lot like games that pressure you into buying powerups
  - DanBC 11y ago
    > They also won't give accounts to just anybody. You need a letter from your employer so you can't open an account if you're unemployed. Even with that, you have to wait a couple of weeks for an appointment to talk to somebody before they open your account. My T&C even made it a requirement for my account to receive a regular minimum deposit each month. Unemployed people can get what's called a "basic bank account". They need this for their benefit to be paid into. They need to prove their identity, but that can be done with driving licences or passports or utility bills or tenancy agreements. The requirements for your particular account - which is not a basic account - are not generalisable across all accounts. I agree that UK banks are aggressive at charging fees, often to people who can't afford them. And that the opening times suck. And that the telephone staff can be rude and unhelpful.
  - EliRivers 11y ago
    They also won't give accounts to just anybody. You need a letter from your employer so you can't open an account if you're unemployed. Utter rot. In fear of being legally compelled to, many UK banks offer a very basic bank account that they typically don't advertise or offer. http://www.moneysavingexpert.com/banking/basic-bank-accounts http://www.moneysavingexpert.com/banking/basic-bank-accounts
samdung 11y ago
Almost all banks in India charge hefty penalties for not maintaining a 'minimum balance' in your accounts. As a hand-to-mouth startup we end up paying a few thousand rupees every year which makes us even poorer ...
lordnacho 11y ago
I read somewhere that there's also an issue with bulk purchasing. If you've got no money, you end up having to buy eg single cans of drinks instead of large bottles, small packets of washing powder, and so on for various ordinary items. That means you'd end up paying a lot more for a similar amount of stuff than someone who happened to have the money for the bulk. The other end where it hurts is your ability to take risk. If someone low balls you on a job offer, and you're flat broke, you don't have any runway to find a better offer. You also can't take a short-term mortgage (tends to be lower at the front of the curve) and will probably have to lock in a higher, longer term. You can't hold a lot of investments because you'll end up having to liquidate them at a cost. So you keep your money in cash or cash-like instruments and inflation eats a bit, too. "It's expensive to be poor" is actually a well known saying for good reasons.
- jkimmel 11y ago
  >If you've got no money, you end up having to buy eg single cans of drinks instead of large bottles...you'd end up paying a lot more for a similar amount of stuff than someone who happened to have the money for the bulk. As an aside, this effect may be further pronounced if lower-income consumers don't have the storage space for bulk purchasing. Even if the differences in price are within someone's budget, they may be forced to purchase smaller, more expensive per unit items because they don't have enough shelf/refrigerator/storage space. In San Francisco for example, I think many people who wouldn't necessarily be considered lower-income consumers are negatively effected by an inability to purchase in bulk.
  - amelius 11y ago
    But poor people could organize via the internet and buy in bulk as a group.
    - dalke 11y ago
      Quoting from the article: > Low smartphone penetration in turn makes life more expensive in other ways. The unconnected do not benefit from the cheap communication, education, and even transport the app economy provides. A quarter of poor households do not use the internet at all, which makes seeking out low prices harder.
known 11y ago
Here's How America's Minimum Wage Stacks Up Against Countries Like India, Russia, Greece, And France http://www.businessinsider.in/Heres-How-Americas-Minimum-Wage-Stacks-Up-Against-Countries-Like-India-Russia-Greece-And-France/articleshow/21922146.cms http://www.businessinsider.in/Heres-How-Americas-Minimum-Wag...
asgard1024 11y ago
No kidding! Another "insightful" article from The Economist? What's coming next - it's expensive to be small? Of course there are savings from scaling things up. If you are richer, you can get better advice, because you're often better connected. Others are less inclined to screw you over. And so on..
staunch 11y ago
A few years ago there was a movement to close bank accounts and move to credit unions (or at least ethical banks). Citizens of the world should reject modern banks as the evil institutions they are. I predict that they soon will.
- negamax 11y ago
  What happens when credit union fails? Because they do. Also chances of corruption and mismanagement are higher in them. If you talk about a united credit union, that's essentially banking system. TBH, I don't understand the moaning against banks. They are providing a necessary service, how are they evil?
  - serge2k 11y ago
    Their fee system is regressive.
  - ionised 11y ago
    We had a financial crisis recently resulting from banks breaking laws and rigging the markets. This isn't the first time economies have gone to complete shit due to the extreme greed of banks playing fast and loose. They're destructive entities.
    - negamax 11y ago
      Look at the economies with no to shallow banking systems. High and predatory interest rates, less money available for loans is least of their problems. No banking, no economy. Bitcoin solves the problem about inflation, access to money etc. But s booming economy also needs some sort of lending
      - ionised 11y ago
        Unfortunately a 'booming' economy built on banking and finacial services doesn't seem to benefit everyone equally.
- 11y ago
abalashov 11y ago
Though obviously not as sympathetic due to not being in a state of poverty nor afflicted with basic problems of survival, this rings very true for those of us who have bootstrapped companies with poor cash flow and a relatively high personal expense base. I've been in business for seven years, gradually shifting from consulting to product, while paying normal middle-class living expenses in Atlanta the whole time. While the numbers are a lot bigger than those discussed in the article, it's the same fundamental problem: bad cash flow burnt my credit to the ground, and has cost me untold sums in late fees, interest, high cost of borrowing, tax penalties, bank fees -- the works. No, can't plausibly cry poor house in good conscience. Nevertheless, the old NET-30/60/90 day shuffle when one has monthly bills to pay can be quite demoralising, and stops many small-scale entrepreneurial endeavours dead in their tracks. It's not poverty, but it's still a question of livelihood and, ultimately, survival and purpose. The hard lesson I've learned is: just because one has (e.g.) $100k in gross revenue does not mean one can live a lifestyle and/or run a company as one could on a $100k salary. Effectively, it needs to be discounted to something like $35k to account for lukewarm cash flow, which means making $100k is really like making $35k.
erikb 11y ago
Relationships and education also takes a huge part in how one's life shapes. If you put a business degree guy from Harvard on minimum wage he'll probably do a lot better, knowing how to save taxes, how to talk to banks and find good deals, sleeping at a friend's castle instead of the street.
gambiting 11y ago
Considering the very first example from the article - does America not have bank transfers? Or accounts which cannot be overdrawn? I've had bank accounts in multiple different countries and it's usually the same - if you don't apply for an overdraft, you won't get one. If you were given one, you can cancel it. If you weren't given one, then there's practically nothing that could actually overdrawn the account, the only time when that happened to me was when the currency value changed in between me sending the money and the bank processing the transaction, at which time it was too late for the bank to reverse it - so I went like -$2 on my account which wasn't supposed to be overdrawn. And $7 to send a money order? Really?
- serge2k 11y ago
  If you don't have the overdraft they ding you $35 or whatever for a NSF fee instead. So your 2 dollars overdrawn becomes the hassle of a bounced check + a bunch of money gone to bank fines.
- jonathankoren 11y ago
  All checking accounts can be overdrawn. You can pay for "overdraft protection", but that's more like paying a fee so that you can get a flat overdraft fee instead of paying multiple fees in a single day. Many people have been burned by using a debit card in an effort to avoid over drafting, and getting multiple overdrafts (and their $35 per incident fee) in a single day. Oh, the protection also comes with a text message that tells you when you have something like $3.00 left in your account. My favorite fee is the "maintenance fee" aka "inactivity fee". It's legal for a bank to take your money $50 a month if you don't spend it. There's no justification for this. It's not like the bank isn't making money off my deposit already, and it's not like the bank is polishing my coins.
  - gambiting 11y ago
    Again, insane, and I don't understand how this works in US. Here if I try to pay with my debit card for anything,but don't have enough money in my account, the transaction gets declined at the till(or I get an error while paying online) - it doesn't result in any charges, just means I cannot pay. Do US banks allow debit cards to overdraw accounts? Isn't this against the entire idea of debit cards??
pfalke 11y ago
The EU introduced regulation to make bank accounts available to everybody - even those without a permanent address of residence [0]. The EU's members are currently passing the corresponding national laws (they have until 2016 to do so). [0] http://www.europarl.europa.eu/news/de/news-room/content/20140411IPR43466/html/Ein-Girokonto-f%C3%BCr-jeden-EU-B%C3%BCrger http://www.europarl.europa.eu/news/de/news-room/content/2014...
- mahouse 11y ago
  I have bank accounts with Visa debit cards and I pay 0 for them. It really shocks me to see that in some less civilised countries people need to pay to give their banks money to play with.
  - justincormack 11y ago
    Well once not paying interest did actually pay for bank accounts, when interest rates were high. Now they are zero, banks switched to mis-selling profifitable financial services to pay for it. What they seem incapable of is actually making cheap bank accounts by significantly reducing costs. Generally you expect them to have some way to cover their costs, unless the government is going to provide bank accounts as a basic service.
david-given 11y ago
The best description of this I've read was by Terry Pratchett: ---snip--- The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money. Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles. But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet. This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness. ---snip---
- x0x0 11y ago
  The american equivalent is a car. There isn't a car for under $3k that's worth a damn, but if you need transport and that's what you can afford then that's what you'll have to buy and suffer the unreliability and the never ending maintenance costs a $3k car brings.
- sigma2015 11y ago
  In my (anecdotal) experience the relation between price an quality is not just not proportional - it seems to be completely spurious after a certain minimum-price is reached. You can get very high quality and long lasting stuff for reasonable prices. People who are poor though tend to not investigate products or reflect on decisions they make in that area. This leads to buying overpriced and unnecessary gadgets - often of very low-quality. The shoe-analogy doesn't really work in my opinion nowadays that manufacturing is industrialized and automated.
  - deleted 11y ago
    [deleted]
  - ptaipale 11y ago
perfunctory 11y ago
> In 2014 nearly half of American households said they could not cover an unexpected $400 expense without borrowing or selling something. Wow!
heapcity 11y ago
Poor people often have a smaller proportion of income available for their 401k too.
alfapla 11y ago
One of the reasons why poverty is so difficult to solve is that, in a way, poverty is a biological niche. Even if you could manage to lift everyone out of poverty, that niche will still be there, waiting to be filled again.
Simulacra 11y ago
Doesn't even factor in the cost of healthcare, limited choices in housing and jobs, and the lost opportunity costs...

79 points by dlubarov 11y ago

cLeEOGPw 11y ago

Paywall.

dima55 11y ago
Turn your javascript off already. Makes everything better
- rjaco31 11y ago
  Uh? I have Javascript off, and all I see is a giant footer on this page.. http://i.imgur.com/NodrsQH.png http://i.imgur.com/NodrsQH.png
pentestercrab 11y ago
Paywalls with workarounds are OK; paywall complaints are off topic. Please see [1]. 1: https://news.ycombinator.com/item?id=10178989 https://news.ycombinator.com/item?id=10178989
- mahouse 11y ago
  That's the most stupid thing ever.

IshKebab 11y ago

A lot of this is specific to the US. For example UK bank accounts are nearly all free, no matter how much money is in them. 99% of cash machines don't charge for withdrawal no matter which bank you are with.

djhworld 11y ago
Maybe, but we still have a scourge of payday lenders.
eru 11y ago
UK banks are the scum of the earth. They charge you for everything. Especially bad are standing orders when you don't have money in your account. German banks (as a counter-example) just won't let the transfer go through. British banks charge you 25 quid. Weren't British banks even recently ordered by their regulator to be less evil with their fees?
- jbb555 11y ago
  What? I've had various UK bank accounts for years and I don't remember every being charged anything at all. Except for a few one off things like same day payments to buy a house, that kind of thing.
  - DanBC 11y ago
    Free banking in the UK usually means "free banking for a set of services, so long as your account is in credit". Large charges on people who inadvertently went overdrawn by less than £10 for less than a day have been a problem for many people in the UK. HSBC changed from a £25 fee each time the account went informally overdrawn to a £5 per day each time the account went overdrawn. http://www.telegraph.co.uk/finance/personalfinance/bank-accounts/11036692/HSBCs-new-5-a-day-overdraft-explained.html http://www.telegraph.co.uk/finance/personalfinance/bank-acco... Submitted article is talking about poor people. Budgeting is tough for poor people, and penalising those poor people because they are in tiny amount of debt for less than 48 hours feels unfair.
    - eru 11y ago
      On a single day the banks ordered the outgoing transactions from biggest to smallest, making sure the maximum number of transactions hit the 25 GBP fee. (They had some really crappy excuse for that, too.)
- buffoon 11y ago
  UK here. Haven't had a charge ever on HSBC since I opened my account 11 years ago. And before that no charges on NatWest back to 1989. Depends how you run your finances.
gmac 11y ago
UK bank accounts are nearly all free Which is great, except they make a load of their money from hefty overdraft charges (per the article), which means the poor cross-subsidising the rich.
- iofj 11y ago
  Well when the banks lost the ability to invest due to QE, first in the US, then in Europe, the money to pay for providing bank accounts had to come from somewhere else. Frankly, this is explicit government policy. Hell, QE is so ridiculous. What it effectively does is that it gives government more control over the economy. The QE money guarantees the government money that "it has to pay back" but doesn't pay interest on. In other words, the government believes (and may be right) that this money never needs to be paid back, and this is what's subsidizing government spending at the moment. Effectively a tax on the monetary base instead of on other things like assets (tax the people who only have money to the benefit of those who own houses, stocks, bonds, ... that sort of thing. And this is done without explicitly charging them anything). Currently, every European is paying 120 euros monthly to subsidize banks and stock/bond prices. They are going to keep doing this "for 2 years" (after that, the theory is, governments are going to be offered more free money and say "no thank you, I've had enough". In other words, fat chance). By that time every European will have paid 3000 euros to push up stock prices, the vast majority does so without owning stock, so it's just a cost for them. (The US poor have paid 8333 per-person over the last 4 years to create the current bubble in stocks, house prices, bonds and so on. Currently they're not paying anymore. Note that the stock market is doing very badly. Expect the housing market to crash shortly) Now you might think that you haven't lost any money, and that's true, you've lost value. Those 8333 you paid over the last 4 years mostly went to funds with the purpose of making houses more expensive. Making stocks more expensive, and the like. So you haven't lost money ... well no, you haven't. You've lost part of the ability to buy houses, stocks, cars, bread, ... But don't worry ! The official statistics show no loss of purchasing power (they did take out gasoline, cars, houses, ... you see when those things got expensive, a lot of people stopped buying them. So "it doesn't make sense to have them in the consumption index anymore". Great, and might even be accurate, but let's not pretend this remains a useful metric to compare the wealth of the average American to 20 or even 10 years ago). And this is explicit government policy. It's not like the ministers and so on don't know this. The net effect is to let the government control slightly over 50% of economic activity, which wouldn't be sustainable otherwise. So they make sure the extra taxes are well-hidden.
natmaster 11y ago
When I visited London and withdrew money from my US bank account the London bank charged me a lot, but my US bank charged me nothing.
Asbostos 11y ago
I've never seen a country with more horrible banks than the UK. They get their profit from poor people. They make it easy to accidentally overdraw and then charge you a massive fee. Don't pay the fee in time and you get another one because the fee kept you in overdraft. They also won't give accounts to just anybody. You need a letter from your employer so you can't open an account if you're unemployed. Even with that, you have to wait a couple of weeks for an appointment to talk to somebody before they open your account. My T&C even made it a requirement for my account to receive a regular minimum deposit each month. The phone staff are rude and unhelpful and the branches are usually closed when people need them the most (mornings and evenings) so the few useful times they do open (Sat morning), they're overcrowded and people end up missing out. This is a failure of the market though. People want free, so the banks have to provide free. But they also have to make money, so they only option is dirty tricks. A lot like games that pressure you into buying powerups
- DanBC 11y ago
  > They also won't give accounts to just anybody. You need a letter from your employer so you can't open an account if you're unemployed. Even with that, you have to wait a couple of weeks for an appointment to talk to somebody before they open your account. My T&C even made it a requirement for my account to receive a regular minimum deposit each month. Unemployed people can get what's called a "basic bank account". They need this for their benefit to be paid into. They need to prove their identity, but that can be done with driving licences or passports or utility bills or tenancy agreements. The requirements for your particular account - which is not a basic account - are not generalisable across all accounts. I agree that UK banks are aggressive at charging fees, often to people who can't afford them. And that the opening times suck. And that the telephone staff can be rude and unhelpful.
- EliRivers 11y ago
  They also won't give accounts to just anybody. You need a letter from your employer so you can't open an account if you're unemployed. Utter rot. In fear of being legally compelled to, many UK banks offer a very basic bank account that they typically don't advertise or offer. http://www.moneysavingexpert.com/banking/basic-bank-accounts http://www.moneysavingexpert.com/banking/basic-bank-accounts

samdung 11y ago

Almost all banks in India charge hefty penalties for not maintaining a 'minimum balance' in your accounts. As a hand-to-mouth startup we end up paying a few thousand rupees every year which makes us even poorer ...

lordnacho 11y ago

I read somewhere that there's also an issue with bulk purchasing. If you've got no money, you end up having to buy eg single cans of drinks instead of large bottles, small packets of washing powder, and so on for various ordinary items. That means you'd end up paying a lot more for a similar amount of stuff than someone who happened to have the money for the bulk. The other end where it hurts is your ability to take risk. If someone low balls you on a job offer, and you're flat broke, you don't have any runway to find a better offer. You also can't take a short-term mortgage (tends to be lower at the front of the curve) and will probably have to lock in a higher, longer term. You can't hold a lot of investments because you'll end up having to liquidate them at a cost. So you keep your money in cash or cash-like instruments and inflation eats a bit, too. "It's expensive to be poor" is actually a well known saying for good reasons.

jkimmel 11y ago
>If you've got no money, you end up having to buy eg single cans of drinks instead of large bottles...you'd end up paying a lot more for a similar amount of stuff than someone who happened to have the money for the bulk. As an aside, this effect may be further pronounced if lower-income consumers don't have the storage space for bulk purchasing. Even if the differences in price are within someone's budget, they may be forced to purchase smaller, more expensive per unit items because they don't have enough shelf/refrigerator/storage space. In San Francisco for example, I think many people who wouldn't necessarily be considered lower-income consumers are negatively effected by an inability to purchase in bulk.
- amelius 11y ago
  But poor people could organize via the internet and buy in bulk as a group.
  - dalke 11y ago
    Quoting from the article: > Low smartphone penetration in turn makes life more expensive in other ways. The unconnected do not benefit from the cheap communication, education, and even transport the app economy provides. A quarter of poor households do not use the internet at all, which makes seeking out low prices harder.

known 11y ago

Here's How America's Minimum Wage Stacks Up Against Countries Like India, Russia, Greece, And France http://www.businessinsider.in/Heres-How-Americas-Minimum-Wage-Stacks-Up-Against-Countries-Like-India-Russia-Greece-And-France/articleshow/21922146.cms http://www.businessinsider.in/Heres-How-Americas-Minimum-Wag...

asgard1024 11y ago

No kidding! Another "insightful" article from The Economist? What's coming next - it's expensive to be small? Of course there are savings from scaling things up. If you are richer, you can get better advice, because you're often better connected. Others are less inclined to screw you over. And so on..

staunch 11y ago

A few years ago there was a movement to close bank accounts and move to credit unions (or at least ethical banks). Citizens of the world should reject modern banks as the evil institutions they are. I predict that they soon will.

negamax 11y ago
What happens when credit union fails? Because they do. Also chances of corruption and mismanagement are higher in them. If you talk about a united credit union, that's essentially banking system. TBH, I don't understand the moaning against banks. They are providing a necessary service, how are they evil?
- serge2k 11y ago
  Their fee system is regressive.
- ionised 11y ago
  We had a financial crisis recently resulting from banks breaking laws and rigging the markets. This isn't the first time economies have gone to complete shit due to the extreme greed of banks playing fast and loose. They're destructive entities.
  - negamax 11y ago
    Look at the economies with no to shallow banking systems. High and predatory interest rates, less money available for loans is least of their problems. No banking, no economy. Bitcoin solves the problem about inflation, access to money etc. But s booming economy also needs some sort of lending
    - ionised 11y ago
      Unfortunately a 'booming' economy built on banking and finacial services doesn't seem to benefit everyone equally.
11y ago

abalashov 11y ago

Though obviously not as sympathetic due to not being in a state of poverty nor afflicted with basic problems of survival, this rings very true for those of us who have bootstrapped companies with poor cash flow and a relatively high personal expense base. I've been in business for seven years, gradually shifting from consulting to product, while paying normal middle-class living expenses in Atlanta the whole time. While the numbers are a lot bigger than those discussed in the article, it's the same fundamental problem: bad cash flow burnt my credit to the ground, and has cost me untold sums in late fees, interest, high cost of borrowing, tax penalties, bank fees -- the works. No, can't plausibly cry poor house in good conscience. Nevertheless, the old NET-30/60/90 day shuffle when one has monthly bills to pay can be quite demoralising, and stops many small-scale entrepreneurial endeavours dead in their tracks. It's not poverty, but it's still a question of livelihood and, ultimately, survival and purpose. The hard lesson I've learned is: just because one has (e.g.) $100k in gross revenue does not mean one can live a lifestyle and/or run a company as one could on a $100k salary. Effectively, it needs to be discounted to something like $35k to account for lukewarm cash flow, which means making $100k is really like making $35k.

erikb 11y ago

Relationships and education also takes a huge part in how one's life shapes. If you put a business degree guy from Harvard on minimum wage he'll probably do a lot better, knowing how to save taxes, how to talk to banks and find good deals, sleeping at a friend's castle instead of the street.

gambiting 11y ago

Considering the very first example from the article - does America not have bank transfers? Or accounts which cannot be overdrawn? I've had bank accounts in multiple different countries and it's usually the same - if you don't apply for an overdraft, you won't get one. If you were given one, you can cancel it. If you weren't given one, then there's practically nothing that could actually overdrawn the account, the only time when that happened to me was when the currency value changed in between me sending the money and the bank processing the transaction, at which time it was too late for the bank to reverse it - so I went like -$2 on my account which wasn't supposed to be overdrawn. And $7 to send a money order? Really?

serge2k 11y ago
If you don't have the overdraft they ding you $35 or whatever for a NSF fee instead. So your 2 dollars overdrawn becomes the hassle of a bounced check + a bunch of money gone to bank fines.
jonathankoren 11y ago
All checking accounts can be overdrawn. You can pay for "overdraft protection", but that's more like paying a fee so that you can get a flat overdraft fee instead of paying multiple fees in a single day. Many people have been burned by using a debit card in an effort to avoid over drafting, and getting multiple overdrafts (and their $35 per incident fee) in a single day. Oh, the protection also comes with a text message that tells you when you have something like $3.00 left in your account. My favorite fee is the "maintenance fee" aka "inactivity fee". It's legal for a bank to take your money $50 a month if you don't spend it. There's no justification for this. It's not like the bank isn't making money off my deposit already, and it's not like the bank is polishing my coins.
- gambiting 11y ago
  Again, insane, and I don't understand how this works in US. Here if I try to pay with my debit card for anything,but don't have enough money in my account, the transaction gets declined at the till(or I get an error while paying online) - it doesn't result in any charges, just means I cannot pay. Do US banks allow debit cards to overdraw accounts? Isn't this against the entire idea of debit cards??

pfalke 11y ago

The EU introduced regulation to make bank accounts available to everybody - even those without a permanent address of residence [0]. The EU's members are currently passing the corresponding national laws (they have until 2016 to do so). [0] http://www.europarl.europa.eu/news/de/news-room/content/20140411IPR43466/html/Ein-Girokonto-f%C3%BCr-jeden-EU-B%C3%BCrger http://www.europarl.europa.eu/news/de/news-room/content/2014...

mahouse 11y ago
I have bank accounts with Visa debit cards and I pay 0 for them. It really shocks me to see that in some less civilised countries people need to pay to give their banks money to play with.
- justincormack 11y ago
  Well once not paying interest did actually pay for bank accounts, when interest rates were high. Now they are zero, banks switched to mis-selling profifitable financial services to pay for it. What they seem incapable of is actually making cheap bank accounts by significantly reducing costs. Generally you expect them to have some way to cover their costs, unless the government is going to provide bank accounts as a basic service.

david-given 11y ago

The best description of this I've read was by Terry Pratchett: ---snip--- The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money. Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles. But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet. This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness. ---snip---

x0x0 11y ago
The american equivalent is a car. There isn't a car for under $3k that's worth a damn, but if you need transport and that's what you can afford then that's what you'll have to buy and suffer the unreliability and the never ending maintenance costs a $3k car brings.
sigma2015 11y ago
In my (anecdotal) experience the relation between price an quality is not just not proportional - it seems to be completely spurious after a certain minimum-price is reached. You can get very high quality and long lasting stuff for reasonable prices. People who are poor though tend to not investigate products or reflect on decisions they make in that area. This leads to buying overpriced and unnecessary gadgets - often of very low-quality. The shoe-analogy doesn't really work in my opinion nowadays that manufacturing is industrialized and automated.
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- ptaipale 11y ago

perfunctory 11y ago

> In 2014 nearly half of American households said they could not cover an unexpected $400 expense without borrowing or selling something. Wow!

heapcity 11y ago

Poor people often have a smaller proportion of income available for their 401k too.

alfapla 11y ago

One of the reasons why poverty is so difficult to solve is that, in a way, poverty is a biological niche. Even if you could manage to lift everyone out of poverty, that niche will still be there, waiting to be filled again.

Simulacra 11y ago

Doesn't even factor in the cost of healthcare, limited choices in housing and jobs, and the lost opportunity costs...