14 ms·

Why it costs so much to be poor in America

• hprotagonist 9y ago
  “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.”
  • loorinm 9y ago
    The boots is just the beginning. Through financial products, the rich actually get paid simply for having money, while the banks charge fees to customers simply for being poor. Banks charging customers simply for being pior is just the tip of the iceberg of how our society is designed to increase the stratification of rich and poor. The more you already have, the more you can make money just by having more than other people. It’s exponential increases on returns the richer you get. The poorer you get the harder it is to make even slight progress toward bettering your situation. But we as “normal people” are to blame for this. We all agree to play by the rules of a few mentally ill sociopaths and that’s really on us.
    • 21 9y ago
      > But we as “normal people” are to blame for this. We all agree to play by the rules of a few mentally ill sociopaths and that’s really on us. That it's true. But I've also seen in a lot of countries poor people voting for policies which will actually make them poorer. Poor people arguing against universal health care. Arguing against taxes for the rich and regulation. Typically because they are tricked to fight against other poor people (other religions, other ethnicities, other backgrounds)
      • supermarine 9y ago
        > But I've also seen in a lot of countries poor people voting for policies which will actually make them poorer. "Let's repeal Obama-care and drive up health care costs!" "Let's give tax breaks to the rich, at our expense!" — America, 2017-2018
      • burfog 9y ago
        I know it is easy to assume that people are tricked. Perhaps the obvious alternative is that they are evil. If you want to understand these people, consider that they instead have different values which do not derive from a fight against other poor people. People will vote against government benefits for many reasons, even if at first glance it seems to hurt them. One reason is self-respect. Many of these voters feel terrible if they are getting government help. They might feel a need to take it if offered, but also feel that it isn't right. It can feel like stealing and it can feel like being treated as a child. Some people value independence and do not want to be tempted with dependence. Another reason is a concern for the economy. If a bit of welfare is good, then lots of welfare must be extra-good... but then nobody works (except under treat of arrest) and you have an economy like that of Venezuela. So if that is what we'd get, voting to go the other way is the safer choice. Some people feel a religious opposition to taxing the wealthy: https://en.wikipedia.org/wiki/Prosperity_theology https://en.wikipedia.org/wiki/Prosperity_theology
        • sgift 9y ago
          > One reason is self-respect. Many of these voters feel terrible if they are getting government help. They might feel a need to take it if offered, but also feel that it isn't right. It can feel like stealing and it can feel like being treated as a child. Some people value independence and do not want to be tempted with dependence. Which is a perfect example of what people have been tricked to believe and then it got repeated as often as possible to make sure it gets burned into peoples brain to make them believe "that's just the way I am"
    • gizmo686 9y ago
      "r > g" -- Thomas Piketty, Capital in the 21st centuary If the rate of return on capital (r) is greater than the growth rate of the economy (g), then you almost inevitably get an increasing concentration of wealth. That being poor actually costs money is just icing on the cake.
      • nubbins 9y ago
        And if I remember r is always greater than g, except for around WWI and WWII. The rich will always get richer, short of anything like destroying and rebuilding the entire country.
    • kaycebasques 9y ago
      > Through financial products, the rich actually get paid simply for having money, while the banks charge fees to customers simply for being poor. Concise explanation of the absurdity
  • wrycoder 9y ago
    True. I have a pair of custom Limmer boots that I bought over forty years ago for $350. I take good care of them, and they look nearly as good as new. I expect they will easily last me the rest of my life.
• dropit_sphere 9y ago
  I was thinking about just this today. There's an interesting corollary, though: just as it can be a vicious cycle downwards, it can also be a virtuous cycle upwards.
  • thephyber 9y ago
    > just as it can be a vicious cycle downwards, it can also be a virtuous cycle upwards. Hrm. I see how the two are _options_, but they aren't in equal proportion. Did Wells Fargo take the fees earned from the millions of accounts they created during their sales-quota scandal and use it to subsidize other poor account holders? More likely than not, they simply used it to pay into their capital reserves and redistribute to shareholders. I have the strong suspicion that there are mental blocks that prevent people from addressing their low balance (in addition to not being flush with cash). My father kept getting a very noticeable "overdraft fee" postcard in the mail. I offered to help him keep a floating balance just to keep him from paying the $25-50 per overdraft. He declined and continued to get a few per month. It was simply mentally taxing for him to move his money from one checking account to another in time for his checks and other payments to clear. I hope all of the {Facebook, Twitter, *gram, etc.} A/B testing programmers retire from "growth hacking" social media websites and start putting those psychology-manipulating skills to non-profits that help people train themselves to lose less money. I suspect one of the reasons many people are poor is because they simply haven't learned to "life hack" the small things that prevent you from losing money (as opposed to making more).
• ebikelaw 9y ago
  Why does anyone have an account at Bank of America or Wells Fargo? There is a community bank in every town in the country.
  • supermarine 9y ago
    Community banks are usually worse than regular banks. Credit unions are better, but large banks (Chase, Wells Fargo, BoA, etc) have (usually) more offerings (credit card + checking + car + mortgage + investing) and are usually a lot more accessible for normal people. Also: big banks advertise.
    • dsmithatx 9y ago
      I haven't found this to be true. My credit union (for 10+ years) has never charged me any fees for checking and has had free online bill paying. They also gave me a great rate on my car loan. My previous credit union was very comparable. I had very bad experiences with BOA and Chase who hit me up with fees and made serious mistakes. Once I tried to make two payments because i was late the previous month. They manually decided that I must of made a mistake and failed to make one of the payments (they assumed it was mistake and never notified me). As a result my insurance was cancelled and renewing my policy cost me around $1700. That was at BOA 20 years ago and I've used credit unions ever since. Since I was barley getting by at the time I had no recourse.
      • supermarine 9y ago
        As I said: "Credit unions are better" So, you have found it to be true.
        • chipperyman573 9y ago
          Not the OP but I read your statement as "community banks are bad, credit unions are okay but larger banks are the best". I believe GP is arguing that credit unions are the best and larger banks are just okay.
      • 9y ago
• techsupporter 9y ago
  Yep. I, and I'm sure a lot of others here, have been on both ends of this spectrum. I remember having to roll quarters to go to the city to pay the water bill (they wouldn't accept loose change and a money order from the corner store was $1.49 which was often 5% of my water bill at the time) and then wait under the clerk's wary gaze while the coin rolls were counted and a couple of random rolls were verified. The worst was the electric bill. I've been in the exact situation described in the article, past due by under $100 and service remotely cut off. TXU Energy wanted a grand total of $793 to restart service, including the past due balance, a reconnection fee, and a deposit (plus a fee for taking such a large deposit). Fortunately, at least at the time, Texas' deregulated energy market rules didn't prohibit a subscriber from switching companies even when owing a balance to a previous one, so I was able to get my mother to co-sign on my having service with Texas-New Mexico Power. These days, two jobs and many salary rises later? My water/sewer/garbage bill is direct debited from my checking account, same for the gas bill. Seattle City Light, CenturyLink, T-Mobile, and every other bill? Automatically charged to one of a handful of credit cards I have with >$20,000 limits. The house where I live ran into a medium-sized electrical problem that cost about $5,300 to fix. Instead of panicking, I charged the bill to a credit card and then used a 0% balance transfer on another one to make it be an interest free loan for 18 months. I spent more in one year on overdraft fees ($1,550) back in the early 2000s than I spend on mobile phone service ($1,200) this year, to say nothing of all of the costs for payday loans and late fees and all of that. Being poor in America absolutely sucks ass and, the worst part is, I'm pretty sure virtually every one of our societal and financial systems is engineered to enforce that feeling of helplessness, not to make it better.
  • cobookman 9y ago
    Sounds like a business opportunity. While unlikely to be profitable. I'm sure you could get some donations to offer better financial services to the bottom percentages.
    • hkmurakami 9y ago
      My understanding is that Walmart and Amex's bluebird program tried to make things a little bit better, but probably doesn't address all the fundamental structural issues in place
• rbcgerard 9y ago
  On the banking side, some of it is fairly straight forward - the estimates I’ve seen say it cost ~$100-$500 for a bank to administer a checking account annually. The current net interest margin banks earn on your money in the US is 3.15%. Which means if a bank charges no fees - and it costs them $315 to administer your account - you need to maintain a $10,000 balance for them to break even. Once you understand that dynamic - you understand that banks that want to offer low balance free checking - need to either make it up on fees or on cross selling opportunities...
  • Anechoic 9y ago
    the estimates I’ve seen say it cost ~$100-$500 for a bank to administer a checking account annually. Is that an average or an actual cost per account?
    • supermarine 9y ago
      And what is the breakdown on that? What's actually costing the banks that much?
      • rbcgerard 9y ago
        I don’t know the breakdown, but it’s: banking software, mailed account statements, debit cards, phone support centers, websites, bank branches, compliance, ATM networks, check processing etc. Obviously some of these costs scale very cheaply, but there is quite a bit that goes into a modern bank account+ some customers are costlier than others (lost of call center calls/lost debit cards for example)
    • rbcgerard 9y ago
      It was an average - but it was just for checking accounts
  • greysonp 9y ago
    Plenty of businesses operate off the principle of losing money on one product SKU while making it up on others. Think Dollar Shave Club, game console sales, etc. I imagine banks could take a hit on low-income accounts and make it up on high-income accounts. But apparently they just don't have the financial incentive in this situation to do so. I just wish the moral incentive was enough.
• tabeth 9y ago
  How much money do you have to have to eliminate this? -> How much money do you need to start a bank? -> How much money do you need to start a school? -> How much money do you need to start an organization such that regular people can join and said organization can provide health care benefits this country really needs? -> What does it take to start an organization that can attract talent to be sustainable and simultaneously have a structure such that it can provide the above benefits?
  • kaycebasques 9y ago
    Go for it, and report back to us.
• tedunangst 9y ago
  Direct deposit frequently just means ACH transfer, which can even be from your own account at another bank. Need $250 in direct deposit? Transfer $125 in on the 1st, out the 7th, in the 15th, out the 22nd.
  • lykr0n 9y ago
    No. Most banks can see the difference between an ACH and direct deposit. M&T doesn't, but Chase does for example.
    • tedunangst 9y ago
      Oh? Chase was actually the bank I was thinking of, since they waived the fee on my account as a result of transfers from another account. Been a few years though.
  • vonmoltke 9y ago
    I have never heard of a bank charging customers to receive money. I pay to send money to people at other Banks, but they pay to send it to me.
• macintux 9y ago
  Yeah, barely scratching the surface. Can't afford a car or taxi/Lyft/whatever? You're going to lose hours every single day trying to get around. Hard to work two jobs to make a decent income when you can't get to either one expediently. Don't have a job? Good luck getting to interviews on time. Good luck when they ask whether you have reliable transportation. And heaven forbid you have a felony on your record. And whatever you do, don't twist your ankle walking to the grocery store, because miss too much time from work and you're fired. Oh, you do have a car? Good luck paying for decent tires, or gas, or the tow bill when it inevitably breaks down, or to replace the glass when someone breaks into it, or the insurance, or... Money begets money. Poverty begets poverty.
  • virmundi 9y ago
    I sympathize and agree with your general points. I do wonder about the general idea that there is nothing you can do. People can get bus fare for $1 [1]. They can scrounge money from people they know or total strangers to get more. They can move, even as a transient to a larger city. They can get housing in the new city with public support. They can live in shelters overnight until the support comes through. They can get jobs within walking distance in the city. They can do all of this on their own or with a little help from their fellow humans. Humanity has done this for thousands of years. Would I want to do any of that? No. Would I if necessary. Yes. 1 - https://us.megabus.com/ https://us.megabus.com/
    • macintux 9y ago
      In my city, you can use the bus system and still lose hours each day getting around. And try moving as a transient with young children. Or other family who needs you. Or as a rehabbing drug addict.
      • macintux 9y ago
        I also suspect that moving to a new location and throwing yourself at the mercy of the locals worked a lot better when there were fewer people. (Warning: unsupported speculation follows.) The more crowded our environment gets, the more we feel that helping someone in need is someone else’s problem, and the less likely it is that the random person who might be able to lend you a room, for example, feels confident the community will back them up if you turn out to be trouble. The kind of charity you need as a transient is harder to come by at an individual level than it used to be. You’re more reliant on institutions, and that’s a thin safety net to rely on to throw yourself across the country.
• analyst74 9y ago
  I can sympathize with some of the poor people who had accidental expenses that they could not have planned for. But I'm really having trouble understanding how this article makes it seem those fees are hard to avoid as poor person. When I was living under $1000 budget, overdraft fee was unheard of, because when you have very little money, it's easy to manage, you only need a few hundred dollars in your account for daily spending. And bigger purchases (>$100) are planned so they can be actually paid for. I also never knew there were consequences for paying electricity late, because renting my own place is out of my budget. Funnily, I only ran into those "poor people" issues like expensive credit card interest, overdraft fees, predator car loans after getting my first full-time developer job, because I stopped managing my expenses.
  • tradersam 9y ago
    > And bigger purchases (>$100) are planned so they can be actually paid for. Totally, like when you blow a tire on the freeway? Or get into medical trouble, without sufficient insurance? It's easy to fall down the hole without even realizing it.
    • tyingq 9y ago
      Lived it and concur. It easy to dismiss these things when you have a $2k buffer. Much different when your buffer is $200 or less.
  • lovich 9y ago
    Yea, you could possibly keep everything under control troll. Until you get a single unexpected expense like a major car repair, and then you are stuck in a vicious cycle of trying to keep up.with overdraft payments and interest payments. If you lived uner 1000 a month and had to problems, then all evidence points to your situation being the outlier
  • gizmo686 9y ago
    The problem is, the poor live at close to $0. If unexpected circumstances happen (and they will), they are at risk of going negative, at which point a bunch of fees and expenses kick in. If a "wealthy" person has unexpected expanses, they go to slightly less positive then they planned, but nothing actually happens as a result. Not to mention all the normal ways being poor is expensive (eg. you cannot afford to buy the long-term cheap, bulk/durable items, so you buy the more long-term expansive items because they are cheaper upfront). For what it is worth, my only experience with the issues you list also arose from having too much money. I had split money across multiple accounts, and tried to transfer money into account A in order to fund a large payment from account A. Overdraft, because I did not wait for the transfer to clear.
• tyingq 9y ago
  Had a similar experience with a relative that did some time in prison. The conditions of parole required weekly visits to a far off parole officer visit that had no public transportation access. So, no prospects to get a job because of (now almost universal) background checks. So, no income. And a defacto requirement to either have a car, or have money for a 15 mile Uber trip every week. It basically means that if you are a parolee, you beg friends and family, or violate and return to prison for longer than your original sentence. The trip is a 3 hour commitment, so begging doesn't work well unless you have a really flexible friend or relative. Oy. Guess what cycle that creates? People turning down parole just to not have that monkey on their back. Trading 5+ years of their lives because they can't satisfy an impossible ask. All for drug addict type issues... possession, shoplifting, public intox, loitering, driving with no insurance, etc. No violence, no real palpable victims other than themselves. US problem if you didn't guess already.
  • electricslpnsld 9y ago
    > possession, shoplifting, public intox, loitering, driving with no insurance, etc. No violence, no real palpable victims other than themselves I'm with you on all but one of these -- driving with no insurance seems like a seriously bad idea, and should have consequences. Two tons of steel, even at moderate 35mph speed, is a lot of damn momentum and can do some real damage, and most certainly should be insured.
    • FussyZeus 9y ago
      Fun fact: being poor means more than likely your credit score is low, which also means you pay more to insure a probably worse car. Because you know, your income dictates your likelihood to have an accident.
      • burfog 9y ago
        Insurance cost is not solely due to likelihood of having an accident. The thing that matters is likelihood of causing financial loss/gain for the insurance company. If low-income people are not more likely to cause financial loss, then competition for customers would make the insurance cost equal. Some reasons why this is not so: Bad credit and the likelihood of an accident are correlated because both are affected by risk-taking behavior. People with high income are far less likely to make insurance claims for minor damage. They know that the deductible would prevent recovering most of the cost, and that the insurance cost would increase enough to offset what little was recovered. The claim payment is not worth the ongoing expense of higher premiums. People with low income are less likely to fund minor repairs without an insurance claim; they need the money to make repairs. There is a fraud problem. I've seen this in person, getting advice from a heroin dealer who lived next door. I damaged my car. He said I should just report that I found it that way, parked on the street.
• brudgers 9y ago
  If you do not have it, the alternative is a low-end hotel where you can pay by the week, which lacks the upfront cost but costs much more over time — for the room itself but also increased food costs and life complexity. This ignores hotel taxes which often run 15-20% with the revenue earmarked for attracting tourism/convention traffic. In some ways, hotel taxes may be the most regressive commonly imposed tax scheme in the US.
  • smelendez 9y ago
    A friend of mine who was having a hard time was doing a mix of squatting, camping outside, crashing with friends and staying in a cheap hotel when she had the money. The hotel itself charged refundable deposits that were 20% of nightly rent, and looked for ways not to refund them (checking out two minutes late, letting another guest come in your room). Meanwhile, prostitutes and drug dealers more or less only visit rooms in the high end hotels less than a mile away with nobody batting an eye.
• ahdroit 9y ago
  "and, the worst part is, I'm pretty sure virtually every one of our societal and financial systems is engineered to enforce that "
• alistproducer2 9y ago
  It was only a few years ago that almost all of this article applied to me. I remember before the cfpb forced banks to make overdraft "protection" out-in and being charged $35 instead of the card being declined. I remember biking across town at 5in the morning to make $35/day at a day labor place then giving 2 of those dollars to a check cashing place. Unless you've been poor, you really have no idea how hard it is to get out of that position. And if you have anything on your record, you can forget about not being poor. A record is a lifetime sentence of poverty in America unless you have connections or family wealth.
• beilabs 9y ago
  Single serve items like shampoo, candy, soap are readily available in developing countries like Nepal, they cost much more than the normal sizes we receive in the developed world when you adjust for the quantities. Much worse for the environment over here as well, have seen so many plastic fires in the city with the single serve packaging being utilized as fuel. Being broke sucks, capitalism at its finest.
• dkersten 9y ago
  Being poor always costs more. Rich people can shop around for better deals on pretty much everything, if they want to (eg lower interest rates, lower taxes, etc). Many options that are available to the rich are definitely not available to the poor, and that doesn’t even factor in the charges talked about in the article. It doesn’t surprise me one bit, sadly.
• technics256 9y ago
  This is why I left the United States. I live in Germany, and while every place has its drawbacks, I feel safe, have affordable housing, and don't have to worry about healthcare and predatory things like this if things go south.
• hadriendavid 9y ago
  Take money where it is, in poors’ pockets: they do not have much but they are so many!
• hadriendavid 9y ago
  Take money where it is: in poors’ pockets! They do not have much but they are so many!
• deleted 9y ago
  [deleted]
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