Sirrea Monroe never expected her electricity to be shut off — she was only $70 behind, and she planned to pay it off after her next paycheck. What happened next shocked her: “I called to get it turned back on, paid the $70 with what was supposed to be my rent money, and then the lady says, ‘Great, thank you for your payment! Now I need $250 for the ‘new customer’ deposit.’”
Monroe, a convenience-store manager who has a child with special health needs, was in disbelief. “I’m like, ‘Look, I couldn’t afford $70. Where am I going to get $250?’ Now I’ll be more in the hole than I was before.”
Monroe had been a customer of the electric company for more than a decade, and the power had been off for less than an hour. It did not matter: She had to pay it. It took more than six months to pay off.
It has never been easy to be poor in America, but decisions made in company boardrooms about seemingly modest financial matters — fees, fines, interest rates, minimum balances — make life far harder than it has to be.
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Recently, Bank of America announced that its free, no-minimum-balance checking account will require a $1,500 minimum daily balance or $250 in direct monthly deposit. If customers fall below that threshold, they must pay a monthly fee.
The optics are breathtaking, considering Bank of America made more than $21 billion in profits last year and will receive a multibillion-dollar present from Congress every year from now on, courtesy of the newly slashed corporate tax rate.
Perhaps the fines and fees seem negligible to the executives who make these kinds of decisions, but more than 40 percent of Americans say they cover an unexpected $400 expense without real hardship.
For low-income families, these kinds of costs are everywhere.
Let’s say you clean houses hotel rooms for a living, or wait tables, or work in a child-care center or nursing home. Your income fluctuates depending on the hours you’re given weekly or the tips you get daily, and it barely covers monthly expenses. Since your bank balance isn’t exactly flush — one analysis shows $500 is the median checking account balance for those making less than $25,000 a year — it takes only one glitch in your income or bills to throw everything off.
Once overdrawn, you are hit with overdraft fees, typically $35 apiece. You will be charged a separate fee for each transaction. Incredibly, more than a third of U.S. banks will reorder your transactions and post them not in chronological order, but from largest to smallest by dollar amount, which shoves you faster than necessary into the red and boosts the number of overdraft fees.
If you close your bank account, you will have to cash your check at a check-cashing establishment where you will pay a fee, usually a percentage of the check’s value. Then you’ll need to turn that cash into money orders to pay bills, paying other fees,
Need to buy a car? You may only be able to get financing from a “buy here, pay here” dealership that charges interest rates of 25 percent and up. If you save to buy from the dealership in cash, you may not be able to.
Said one low-income customer in Howard Karger’s book “Shortchanged: Life and Debt in the Fringe Economy:” “They wanted us to put $1,000 down and pay $89 a week for two years,” which amounted to more than $10,000 for a $1,900 car.
If you get a traffic ticket and cannot pay, you could wind up in prison. Kevin Thompson, 19, of DeKalb County, Ga., made an illegal left turn and spent five days in jail because he could not quickly pay the $838 in fees and fines. The ACLU intervened and the case was eventually settled, but the practice is widespread as states and municipalities fund their budgets through fines and fees.
What about a place to live? A $500 security deposit is a significant sum. If you don’t have it, the alternative is a low-end hotel where you can pay by the week, which costs much more over time for the room itself and for increased food costs and life complexity.Food costs themselves are higher for low-income families. Milk and bread at the corner store will cost more, but it may be the only choice you’ve got.
Even agencies tasked with helping financially strapped families can make things harder than they need to be. It is not unusual for families to have to line up before dawn in the cold in front of a government office just to secure an appointment to apply for limited heating assistance at a later date.
American low-income families face many challenges, and some of them require big, complicated solutions. Some are pretty easy to resolve: a modest legal protection, a little policy tweak — or a chief executive that deciding the people who clean his office, tidy his hotel room and serve his lunch don’t need to be penalized for the amount of money in their bank accounts.
Karen Weese is a freelance writer living in Cincinnati.