A couple weeks ago, the New York Times featured a front page story about the vast numbers of Americans who are denied bank accounts due to minor transgressions like a bounced check or overdraft fee. As we discuss frequently in the asset building community, having access to a low-cost bank account is key to participating in the financial mainstream and avoiding the check cashing fees, high interest loans and other fringe financial services that contribute to the high cost of being poor – as powerfully illustrated in the article:
Mr. Korzeniowski, who acknowledges “he made a mistake [by overdrawing his account],” says the fees he pays for cashing checks, paying bills and wiring money cannibalize the paycheck he gets from part-time construction work. “Everything is more expensive,” he said.
Yet for participants in public assistance programs, the barriers to being “banked” go even further. Most fundamentally, many banks don’t cater to lower-income consumers; fees, minimum balance and direct deposit requirements can discourage many who hover near the poverty line from establishing an account. Furthermore, public assistance recipients are often subject to asset limits – as low as $1000 per family in TANF – that can deter saving or even maintaining a bank account.