Same to you, buddy

Wal-mart is now advertising a new "low" rate for cashing checks of only $3.

Any such rate seems like it's too much, since the check is your money, and paying $3 for your own money is a rip-off. But, as Wal-mart points out, $3 is a lot less than many of their competitors charge for this same dubious service. Those check-cashing competitors, Wal-mart says, can charge as much as $8 per check.

Wal-mart's TV ad for this check-cashing service actually underestimates the savings this could mean for their marks customers.  A fresh-faced young couple tells us how happy they are to be using Wal-mart's $3-a-check service instead of the $8 alternative. The husband holds up a calculator and tells us this saves them about $200 a year. With both of them earning a paycheck every two weeks, that's actually more like $250 a year — and that $50 difference would be substantial for the annual budget of a working-class couple outside the fringes of the banking system.

The same quick and dirty arithmetic also lets us easily calculate the annual cost of check-cashing for this couple even at Wal-mart prices: $150 a year.

That $150 is a poverty tax — a fee paid by the poor because they are poor.

But then calling it a poverty tax isn't accurate. It's a poverty surcharge, not a tax. If it were a tax, then the couple in Wal-mart's ad would eventually see some kind of indirect benefit from that $150. Taxes go toward civilization — national defense, highways, sewer systems, health care, police, food safety, clean water, fighting wildfires, developing flu vaccines, etc. And taxes are part of the social contract assented to by everyone who participates in that civilization. But this $150 poverty surcharge doesn't help to fund any of those things and it isn't part of any social contract. It simply lines the pockets of the Walton family and the rest of Wal-mart's shareholders. The poor families paying this surcharge receive no benefit — direct or indirect. All they get in exchange is access to their own money. This $150-a-year surcharge is simply a transfer of wealth from them to much richer people, a direct, you-have-no-say transfer of at least $3 subtracted from every paycheck.

So as nice as it is that this couple is "saving" $250 a year by cashing their checks at Wal-mart instead of the even-more-exploitative competition, it'd be nicer still if they could save an additional $150 a year by not having to pay to cash their paychecks at all.

There's the rub. To cash your paycheck without paying a fee, you need a bank account, and for working-class people, a bank account costs a great deal more than $150 a year.

People who don't realize that — who don't appreciate the enormous, steady cost of a marginal bank account — tend to think that those who rely on check-cashing agencies are just being stupid and wasteful. The couple in the Wal-mart ad, for example, who are paying $150 a year to cash their paychecks could instead open a $100 no-fee savings account that would allow them to cash their paychecks for free. That account would only "cost" them $100 — but even that money would still be theirs, sitting in their savings account and even earning a modest rate of interest.

The problem, though, is that such no-fee accounts are money-losers for the banks themselves. A $100 account with no fees costs the bank more in paperwork and tellers' time than it's worth. In the long-run, such accounts can help depositors develop savings habits and savings balances, developing into the sort of customers banks can and do make money from. But neither the executives nor the shareholders of the bank are interested in that kind of long-run — particularly not when, in the short run, they're losing money on these tiny accounts.

So seeing no incentive to provide such low-balance, no-fee accounts that would allow our young couple to cash their checks without a fee, the bank will instead try to push them into something more lucrative — into the kind of account that generates a steady stream of nickel-and-dime revenue from ATM fees, minimum-balance charges, late fees and, above all, "overdraft protection" charges.

Last year, U.S. banks collected about $36 billion in overdraft protection fees. This year, they expect to transfer about $38.5 billion out of customers' accounts in the form of such fees.

$38.5 billion. $105 million every day. $4.4 million every hour. $73,250 every minute. More than $1,200 a second. Transferred directly from the poor to the rich.

$38.5 billion.

I keep repeating that figure because I can't quite manage to grasp it. The public, obviously, can't grasp it either. Open your window and inhale — smell any torches or smoke from the barricades? Turn on CNBC, Are bankers using fake names and requiring their faces to be distorted? are the bankers still using their real names and allowing their faces to appear onscreen without electronic distortion? No? Then the public still doesn't yet appreciate the meaning of this figure.*

$38.5 billion taken directly out of people's bank accounts.

$38,500,000,000.

I'm not suggesting that everyone who works at a bank that extracts these billions from customers through an overdraft protection scheme is, necessarily, a Bad Person due to working there. And I'm perfectly willing to allow them the chance to defend themselves. I am, in fact, eager to hear their explanation — to hear them describe the actions they've taken to protest this policy and the reasons why such actions have, thus far, not succeeded. My point here is only that such a defense, such an explanation, is required of them if they want to continue interacting on polite terms with the rest of us — if they want to drink in our bars or attend our churches or walk down our streets without parents clutching small children by the hand and dragging them aside and saying, "Come over here, honey, we don't want to go near the banker."

That, at a minimum, is what $38.5 billion a year means.

Yesverywellbut, say those comfortably removed from the economic margins, such fees can be avoided through responsible account management. And the supercilious and dim yesbuts raising this objection will go on to point out that they, personally, have never had to pay such a fee. And they will take this as evidence of their own superior responsibility and their oh-so-superior superiority too all of those stupid working class people stuck at the margins for whom one flat tire or one sick child or one unanticipated $10 expense can incur a cascading series of late fees and overdraft charges and other forms of emergency short-term credit that can easily exceed the $150 that Wal-mart graciously offers to extract from their paychecks each year.

And so …

Crud. Now I've gotten all worked up and forgotten where I'd intended to go with this whole discussion.

The point here, I suppose, is that check-cashing fees may be an exploitative scam run by sleazeballs, but that they may turn out to be a more prudent option for the working poor than the even-more exploitative scam run by the more mainstream, but sleazier sleazeballs of the banking industry.

I should probably wrap up with some practical sort of action steps or something, so OK then:

1. We need a viable community banking option for the working poor, a place where they can cash their paychecks and maybe even someday build their savings without being subject to fees and overdraft protection rackets. We needn't get into the details here of the policies the FDIC and Fed could put in place to protect and encourage such banking options, only to mention that such policies are a Good Thing.

2. $38.5 billion. Seriously. The executives and shareholders of those banks ought to be flipped off, constantly, by everyone they encounter, all day long, from the moment they leave the house in the morning until the moment they return home. Even in church. Especially in church. From the pulpit, in fact. Nonviolent social change doesn't need to be genteel.

- – - – - – - – - – - -

* (Clearer wording courtesy of David S. Thank you.)

  • http://www.facebook.com/nick.speare Nick Speare

    From the article: “And the supercilious and dim yesbuts raising this objection will go on
    to point out that they, personally, have never had to pay such a fee.
    And they will take this as evidence of their own superior responsibility
    and their oh-so-superior superiority too all of those stupid working
    class people stuck at the margins for whom…”

  • http://feygelegoy.myopenid.com/ Feygele Goy

    Fucking-A. Transportation, housing, and food are among those luxuries that should be reserved kept out of those grubby lower-class hands!

  • Brrryce

    Absolutely not true, weirdly enough. I sold a bracelet to a jeweler, saw their bank was near my next stop and popped in to cash it. The teller told me it would be five dollars to cash a check — drawn on their bank! I was flabbergasted. I said, no way. Luckily, the teller said, “I can waive that fee this time.” WTF?

  • Amaryllis

    And so it has been and so it is written
    On the doorway to paradise
    That those who falter and those who fall
    Must pay the price!

    That Javert?

    Anyway, when did it get to be 2009 again?

  • Sgt. Pepper’s Bleeding Heart

    Ooh, I love the resurrection of the posts in the ‘class warfare’ category.

    Shorter jeffp: to avoid penalties, don’t be poor. Cheers mate, that’s really helpful and shows a thorough understanding of Fred’s point.

    A few years ago my bank sent me a letter outlining its exciting new changes to serve me better (ie fees). It also gave handy suggestions for keeping fees low. One was, effectively, “have more spare money!” Jeffp, you don’t work for St George, do you?

    Shorter Javert: all kneel before my awesomeness, ye verily, and weep that thou arst not at awesome as I.

  • http://www.facebook.com/profile.php?id=707811670 Erica Stanford

    This article was referenced by
    http://www.cracked.com/blog/5-things-nobody-tells-you-about-being-poor/
    … under #5, right above the pic of the guy walking in the door
    flipping everyone off.

  • Anonymous

    They’ve got that one figured out too.  You can’t just go to the issuing bank – you have to go to the branch where the check-writer’s account is based.

  • unzippedurmom

    awesome dude, but yesterday you broke your toe and had to pay a 500 dollar deductible, 

  • ArisuZawa
  • Trollworx
  • http://www.facebook.com/profile.php?id=659001961 Brad Ellison

    As a big fan of both Slacktivist and John Cheese, this synergy is delighting me.

  • Fifi LaFlamme

    With overdrafts, there is also a domino effect whereby you are charged the $35 overdraft fee, but you may not be notified of it for a day or two–which can then make another check bounce that according to your calculations should have been covered, incurring yet another overdraft fee… I have been in the situation of keeping very close track of everything, running very close to zero, but having a small charge (like, a 1.50 atm fee) throw everything off into this awful spiral of fees and overdrafts. If you are generally good, though, sometimes the bank will waive the fees, if you call and ask.

  • Nomuse

    Do YOU have access to a computer, Jeff?

    Take a look next time at what your account activity actually does over a period of hours and days.  Merchant charges hit at least twice; once to “check” if there is money in the account, a second time with the correct amount.  During this period your balance fluctuates wildly.

    Bank fees, and recurring automatic debits (such as are required for most auto insurance) hit whenever they chose; also, for insurance at least, for whatever value they chose that month.  Nor does the bank make tracking deposits simple; they will change their minds at least twice about WHEN and HOW MUCH is actually draw-able.

    And at any moment in this dance your bank can find you short.  It’s in their best interest to do so.

    NOT a problem for even the lower middle class — just keep enough balance to cover the expected debits plus error.  But when your last two paychecks got “lost in Payroll, we’ll get them to you ten working days from next monday,” you are down to ten miles in the tank, enough scraps in the pantry for two meals, a cough that won’t quit and a broken tool you can’t finish your current job without…

  • Anonymous

    Honestly it is our fault, but not for being poor. For allowing the rich to breath. We’re all scared. Scared of being raped in prison, scared of being shot by police, scared of being dumped by our women. If we weren’t scared we’d depopulate those board rooms.

    P.S. Bitcoin.

  • alytron

    Cracked linked to it in an article about poverty.

  • CaliMom

    It’s linked in a cracked.com article, “5 Things Nobody Tells You About Being Poor” dated May 27, 2011. That’s how I got here, lol. This is definitely a great post on greedy banks, though. I hate banks to the point that I’m hyper paranoid over the possibility of going in the red (I hardly ever do but that’s because I stress so much about it…way to live, eh?) The only thing that has given me some relief is I downloaded a checkbook register in excel from the microsoft website & as long as I make sure I write everything down (again, hyper paranoid about it…thanks banks for the daily anxiety) the spreadsheet does the math for me. Oh and I use to work for a company that worked daily w/the banks & my manager was a former BofA manager. They are a$$holes & hold people’s money hostage all the time, sometimes if they “think” you might be overdrawn this week (verified by the former BofA manager).

  • Guest

    have a credit union that’s pretty good…pay 1.99 a month overdraft fee…no minimum balance…no direct deposit required…no charges to use debit card either…had it down to 59 cents before-tho now I keep all receipts until they are written in a notebook that is my “bank book”… after having a bank rape me for over $300 in FEES for a 15 cent overdraft…

  • Chenrezi

    Well congratulations on never being blindsided by unexpected expenses, such as, say, car repairs.  Plus towing expenses if your vehicle is inconsiderate enough to break down somewhere other than your own driveway.  Or maybe a pipe in your home springs a leak, and you can’t go without running water until your next paycheck.  And God forbid you get sick or injured at any point ever, because affordable healthcare is still apparently a Bad Thing in this country.

    But no, you’re right.  All these stupid poor people don’t have the sense to be as lucky as you were.  If they would just wise up and stop being so unlucky, their lives would turn around!

    By the way, you do realize that you’ve named yourself after one of the most legendary hardasses in fiction, right?  On the other hand, given what we’ve gleaned of your personality, that was probably intentional on your part.

  • Elle

    Our bank started charging a fee we weren’t warned about.  As a poor family budgeting every last dollar, the appearance of a $7-fee suddenly caused another purchase to go in the red and we were slammed with a $35-fee.  We didn’t have internet access then, and right this moment are homeless and I’m using an open wi-fi.  Getting online isn’t always so easy.  It’s a privilege to have easy internet access, and a privilege to have enough money that a small fee won’t push you over, and a privilege to have enough money to get a free account.  It has nothing to do with being irresponsible.  

    Funny how the rich, those with money to spend, get so much for free.

  • Elle

    Our bank started charging a fee we weren’t warned about.  As a poor family budgeting every last dollar, the appearance of a $7-fee suddenly caused another purchase to go in the red and we were slammed with a $35-fee.  We didn’t have internet access then, and right this moment are homeless and I’m using an open wi-fi.  Getting online isn’t always so easy.  It’s a privilege to have easy internet access, and a privilege to have enough money that a small fee won’t push you over, and a privilege to have enough money to get a free account.  It has nothing to do with being irresponsible.  

    Funny how the rich, those with money to spend, get so much for free.

  • Adam C

     ”Cannot do simple arithmetic”? Ok smart guy, 22 years ago was a completely different economic situation than today. I am also working my way through school at a pizza place, almost the only place left that WILL hire a currently-enrolled college student, from personal experience. That means ridiculous amounts of wear and tear on your car, and not to mention gas. When it was near $4 a gallon, I shelled out close to TWO HUNDRED DOLLARS a week on gas. Want to know what my weekly income at one job was? Around $60, plus the average $120 in tips. Sound like a loss to you? If not, I’ll make the “simple arithmetic” more clear. I made ~$7,600 last year. My expenses incurred AS A RESULT OF WORK AND NOTHING MORE, factoring only gas used on delivery, not even the commute to and from, repairs, and car payment, exceeded $8,500. That “simple arithmetic” comes out to a LOSS of ~$900. That figure is not accounting for car insurance, gas to school or (hah, as if) recreation, or even FOOD.

    So whats the “responsible” solution to this situation? Don’t take out a loan for $2,500 the next time my car breaks down and lose my job, then fail out of school because I can’t make it to class? Or maybe keep trying to find a new job, like I’ve been doing since 2009, and hear the same “We can’t hire you because your school schedule may conflict with the job” a few hundred more times, spending more in gas that i don’t have on the hunt?

    Also, the “poor surcharge” issue: You get charged 12 dollars monthly for not having an average of at least $5,000 dollars during a period(month) at my bank. Translation: If you don’t have enough money, you pay more. That sounds like being charged for being poor to me. I make that threshold $5,000 in about 9 months of work, IF I HAD EXACTLY ZERO EXPENSES. Responsibility has nothing to do with it, not everyone has the same luxury of being able to afford things like food and gas, even while working, you haughty ass.

  • http://www.facebook.com/profile.php?id=1380540055 Christine Lorraine Edmond

    you do realize that 22 years ago, the general public had no internet, much less a phone or computer to use it one. and as a college student, im sure you were no exception. you werent competing in a global economy. i’m gona go out on a limb here, but you probably didnt have kids. if youre a white male, you were at the top of the totem pole to begin with. with ur college education, you could afford to work at taco bell cuz you had bigger opportunities to look forward.

    honestly, you be ashamed of yourself for this comment. you are the proverbial ‘old fool’. you dont even know what youre talking about, youre not even operating in this century. i’m sure most of us have overcome more obstacles at age 22 than youve had in your whole life. your winning 1st place in a local race doesnt mean crap to the people struggling in the olympics.

  • Nancy Irving

    I suppose that the law on this must vary state-to-state, as I remember, years ago, having a bank in Pennsylvania refuse to cash a $6 or $8 check drawn on them, because I didn’t have an account with them.  (I don’t remember the exact amount of the check, but it was less than $10.)

    (I literally started screaming at them, and the bank manager made a “special exception” and cashed the check to get me out of there, LOL.  I don’t recommend the screaming route, however, as I was probably lucky they didn’t call the police.)

  • Joshua Steven Shultz

    I think your efforts at semantic precision are misplaced here. It will merely stifle the process of effective communication. This kind of specificity clouds a debate from it’s core moral issue and thus removes and point of debate at all.
    You’re wrong by your own definition in calling this a “negotiation.”

    The financially weaker party has little to no power in this scenario. By no whimsical stretch of the imagination could they be said anywhere close to enough power in relation to their needs. Your suggestion that they do is actually very insulting to the realities of poverty.

    You’re correct inside the capitalist paradigm (as you stated). However, the topic at hand is beyond the scope of capitalism alone as this paradigm is insufficient to meet the needs of the human race in any acceptable manner without stringent regulatory practices (like gee I don’t know…not allowing Wal-Mart to continue charging people to cash their paychecks or preventing banks from laying a “you don’t have enough money fee” when someone is having money problems).

  • Jlj

    Na, the courts here are full of corrupt stupid people. The big companies and banks can afford the very best attorneys. They almost always win.

  • Lori Holtorf

    Shouldn’t the minimum balance be $0??? People watching every penny and living paycheque to paycheque may need all of those 500 pennies on any given day.  What difference is $5 going to make to the bank?  

    As the daughter of a single mom, I grew up in this kind of financial insecurity.  Lord only knows how much my mom must have paid in overdraft fees, because she considered her $100 overdraft to be part of “her” money.

    Could you not start pushing for banking reform, and keep pushing with the specific proviso that until the banks stop showing a profit, they have to keep changing for the benefit of the people?  (And bonuses in the millions to anyone should be considered “profit”.)  American banks are clearly pushing as hard as they can to defraud as many people as possible… that’s how the economy tanked in the first place!  

    (Being Canadian, I’d love to say we’re not in that situation, but we’re really not far behind.)


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