According to the 2005 U.S. Census Bureau report, there are 37 million Americans identified as poor, up from 35 million in 2002. The Federal poverty definition of poverty is $10,210 for singles, $13,690 for couples, and $17,170 for a family of three. The poor people in America work, they make, according to http://www.povertyinamerica.psu.edu, less than $9.00 per hour. There are many professions, service jobs, dental hygienists, school lunch ladies, retail sales persons, and skilled labor positions that fall within this category. The poor as identified here have a paycheck that must be cashed.
The answer to the question of “is a bank account worthwhile for poor people?” should be a resounding yes if the centuries-held belief in this country is that America is a place where all people can ascend the class ladder. A bank account represents ownership and control. Ownership is something important if a person has been disenfranchised. A poor person or family that possesses a bank account is not prey to the check-cashing establishments, payday loan businesses, and rent-to-own companies that litter poverty-striken neighborhoods.
There are banks and credit unions that offer free checking. Bank of America is one of the best banks I’ve found for poor-middle income individuals. There is not a minimum required for a basic checking account as long as there is direct deposit. The poor who would consider an account include those who work in lower pay positions. A savings account can also be opened with a minimum deposit. Credit unions are also great places for poor people to begin enfranchisement.
A bank account, particularly a checking account with a debit/credit card opens many opportunities for poor people. According to http://www.heritage.org/research/welfare study on poor people in America, they are hardly “impoverished” when compared to other nations. In this country, 3/4 of poor people own a car, 30% own 2 or more, 77% have a TV, 78% have VCR or DVD, 62% have cable or satellite, 46% own a home defined as 3 bedroom, 1 1/2 baths, garage, porch, 76% have air conditioning, only 6% are overcrowded, and the average poor person in America has more living space than the average person in Paris, London, or Vienna. With this in mind, poor people are engaging in the economy and are engaging in exchange. A checking account just makes sense.
A bank account provides a poor person an opportunity to pay bills with checks or through online banking. It is not unthinkable for a poor person to own a computer with Wal-Mart selling newer models for the $500-700 range. The record of what is owned by the average retail, service, or skilled labor working poor indicates it is quite possible for them to have access to computers, cable, and the Internet. This access to the cyper society also enables them to be greater participants in a financial market.
A checking account with a debit card gives them the opportunity to build their credit score as most banks and retailers use the ChexSystem. There are easy instructions on balancing a checking account that will give the poor person more monetary control. An individual’s activity in the market society is recorded on their credit report. The combination of gaining financial acumen and higher credit scores will enable a poor person to make decisions to elevate their overall quality-of-life.
If they have a checking account and a computer, they can engage in online banking. If they engage in online banking, they have a record of their expenses and can become better financial managers. Once they become better financial managers, they will gain greater understanding of how money works and begin to build wealth for a more secure future.
A bank account is also worthwhile for poor people to begin a rise out-of-poverty. The predatory lenders, the Rent-to-Owns and the Check-Into-Cash places all charge people exorbitant interest rates for simple transactions. A savings account will allow a poor person to save $25 per month toward a major purchase instead of paying that same $25 per week for renting a sofa or TV. The checking account will save them the 1-3% charge for paying to cash their check. I live in a little suburb of St. Louis and while there aren’t any check-cashing places here, there is Wal*Mart. There are lines of working poor people every 15th and 30th, there to cash their checks. Wal*Mart charges a fee and then sucks up a large amount of that cash when these same people turn around and go shopping. A checking account will give them the discipline necessary to plan and budget their purchases and not fall into impulse with the “everyday low prices” signs that linger above their heads as they wait in line.
A passbook or onlne savings account like http://www.ingdirect.com can be opened for as little as $25. Ingdirect like other online banks usually require access to a brick & mortar checking account to facilitate the initial deposit. This is anothe reason for a poor person to have an account at a bank. If an online savings account is opened, they can begin the slow and steady process of building wealth by direct-depositing a small percentage of their net income into a higher-interest bearing savings account. Ingdirect and other online banks routinely pay almost double what traditional banks pay for regular savings. The compounding of interest is how money grows. There is a great sense of pride with knowing there is money in the bank for the future.
A last reason for a poor person to have a bank account is to build their financial self-esteem. There is a sense of pride in seeing your name on a set of checks or a bank statement. The debit/credit card gives them options otherwise unavailable to them. The bank account also allows them to build their credit rating and encourage them to save even 1% of their income. It gives hope and offers opportunity.
A bank account for a poor person just makes sense.