up:: Content
author:: : BER staff
full title:: Banking and Poverty: Why the Poor Turn to Alternative Financial Services
url: Link
Highlights
- Banking is typically viewed as the safe, stable, and proper way to manage one’s finances, while alternative financial services are construed as exploitative and vulturine (View Highlight)
- number of unbanked households in the United States was 8.4 million, with an additional 24.2 million underbanked households, households that are not participating or have limited participation in traditional financial institutions (View Highlight)
- major banks, such as Wells Fargo, Chase, and Bank of America, 25 to 40% of checking accounts are simply not profitable and are described as “money losing. (View Highlight)
- To combat this, overdraft fees, debit card swipe fees, ATM withdrawal fees, wire transfer charges, among other charges and fees are impose (View Highlight)
- While banks will deposit funds into accounts only on business days, withdrawals can be made anytime of the week. Banks will also often take time to show the true balance of someone’s checking account leading to monthly overdraft fees of up to $34. (View Highlight)
- However, the annual percentage rates for payday loans are between 300 and 600%; if overdraft fees were treated as a payday loan that is repaid within three days, the APR would be 1700%. (View Highlight)
- While policymakers and governments continue to strongly advise against taking out payday loans and, instead, urge people to opt in to more traditional finance services such as prepaid credit cards, these services remain detrimental to low and moderate-income individuals (View Highlight)
- personalized and community based service played an important role in the livelihood of those in the community. (View Highlight)