8 Ways Being Poor Is Wildly Expensive in America
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Meanwhile Congress is cutting food assistance, forcing even more people to rely on local food banks. The problem is so bad that the food banks are overwhelmed, often running out of food completely. But food banks can’t help people who don’t have places to store or cook food—they are out of luck.
4. Banking. If you are poor you either don’t have a bank account ( 8 percent of American households) or have one that costs so much your money drains away. 28.3% of Americans conduct at least some of their financial transactions “outside of the mainstream banking system,” meaning they have to rely on expensive alternatives like non-bank money orders, check-cashing services, prepaid debit cards and payday loans.
For the poor, even being lucky enough to have a bank account means high fees. You don’t have enough to meet the minimum balance requirements so you pay a monthly fee that eats away at any money you have. You will pay a fee averaging $6 to cash your paycheck. You will be hit by terrible fees if the money runs out before the month does. Overdraft fees are incredible. A Pew graphic illustrates how the median overdraft for a $36 transaction racks up a median $35 in fees. “If an overdraft was treated like a short-term loan with a repayment period of seven days, then the annual percentage rate for a typical incidence would be over 5,000 percent.”
If you are not able to get a bank account (or don’t want to risk paying 5000% for writing a check), things are even worse. You turn to payday lenders. Payday loans cost an average of more than 138 percent in interest and fees. According to Think Progress,
“Most take out nine repeat loans per year with an interest rate as high as 400 percent. Forty-four percent of borrowers ultimately default, even after paying back their loans several times over, and thus are pushed ever closer to poverty. Critics have called the practice ' legalized loan sharking' and describe the industry as 'bottom feeders.' In recent years, major banks have also joined in the practice.”
5. Low pay. Low wages are expensive. When you are paid so little you have to try to get a second job just to have a place to live you don’t have any time left—and time really is money. When you are always working (and getting to and from work) you can’t look for better work. Even if you can look, the time involved and the transportation costs are so high you are eating into the little time and money you might have. The kinds of jobs you end up with if you find one are expensive because you don’t get any paid time off, so any day you get sick or have a child problem you lose money. That’s expensive.
6. Getting paid and not getting paid. Some low-wage employers like Walmart pay you with a debit card. CNBC reported,
Christon works at Walmart. Her paychecks are deposited onto a prepaid debit card—an improvement over old-fashioned paper paychecks, which led to high check-cashing fees. It's hardly a good substitute for direct deposit, however. One cash withdrawal per period is free, but others cost $2. She can avoid the fee by shopping at Walmart and getting cash back at checkout.
Wage theft is much more common than people realize. Wage theft is restaurants stealing tips, employers demanding free time or not even paying the minimum wage, refusing to pay overtime pay when it is due, calling an employee a contractor or a temp, making various deductions from wages, and other ways that workers end up not getting paid for their work. Poor people are vulnerable, and have to take what they can get. Sometimes employers take advantage of that.