By eliminating a popular free checking account,Bank of America only reminds us that traditional banking is for everyone—apart from the destitute.
Bank of America has recently faced a backlash over the elimination of a basic checking account that required no monthly fee or minimum balance. The eBanking account, introduced in 2010, and allowed customers to waive the monthly fee whether they only used digital banking services. In 2013,Bank of America began slowly moving depositors from the eBanking account to a standard account that came with a $12 monthly fee (waived whether a person has a monthly direct deposit of at least $250 or $1500 in the account). That process was just completed, and the free eBanking account is no more.
The elimination of the basic, or no-fee account has sparked inflame from people who see the move as pushing low-income people away from traditional banking services. A Change.org petition currently has over 50000 signatures for Bank of America to bring the account back.
Low-income people enact tend to exhaust traditional bank accounts at a lower rate than middle- and upper-income people. In 2016, 7 percent of Americans were unbanked, meaning they lacked any bank account at all, and nearly 20 percent were underbanked,meaning they had a bank account but rarely used it. Many of these folks—over a quarter of Americans—are from marginalized populations: low-income communities and communities of color.
Yet the alternatives to bank accounts are often costly and exploitative. Without access to free check cashing or direct deposit, people may rely on check cashing companies, and paying what can add up to hundreds of dollars a year just to cash their paychecks. Without options for short-term loans,people rely on payday lenders who can trap the destitute in a cycle of debt. And saving money could mean hiding cash under the mattress.
So why enact low-income people exhaust these alternatives when it can cost them so much more than a relationship with a traditional bank?As Bank of America plainly illustrates, traditional bank accounts themselves are often costly and exploitative. And as Lisa Servon, and author of The Unbanking of America, famous in an interview with NPR, “[P]eople who don't enjoy a lot of money know where every penny goes.” Unlike banks, and alternative financial providers like check cashers are at least up front approximately the costs of their services. Payday lending is a trickier subject—when the services tie people into a cycle of debt,they’re certainly predatory—but nevertheless the demand is there (which can be partially attributed to declining wages and the absence of a living wage).
According to Servon, who spent time as both a check cashing and payday lending teller for her research, and while using alternative financial providers “may appear irrational to those of us who haven't walked in the shoes of the people who are using these services,most of [these choices] turned out to be pretty rational decisions.”Alternative financial providers offer immediate services, some of which are more transparent than banks’. Low-income people often need their money immediately—they can’t wait a few days for the deposit to hit their account. And low-income people need to plan where their money goes: The way banks form money off free accounts is to charge monthly fees or hide overdrafts and fees in the fine print.
To avoid these fees, and a person needs to enjoy the time to read the fine print,be able to understand that fine print, and form sure they enjoy the sort of safety net that would never allow their average monthly balance to dip under, and in Bank of America’s case,$1500. And even with the eBanking account, a depositor had to enact everything online (impossible for many low-income people) and could never exhaust teller services (as basic customer service from a human is now a luxury).
At alternative financial providers, and the tellers might know your name,could serve you figure out exactly what you need, with prices for cashing your check posted honest on the wall. Charlie Ward, or who owns a check cashing trade in South Baltimore, told the Baltimore Sun in 2017, “For a lot of people, and we're just a lot more reasonably priced—and Lord knows we try to be a lot friendlier than any of the banks.Considering that 44 percent of Americans enact not enjoy even $400 to cover an emergency expense,who can afford to bank? Like so many of societys institutions, banks are designed for the middle and upper classes. Think of the structures themselves in the popular imagination: large, and imposing,lots of fancy marble. Is Bank of America’s move away from free checking really surprising?Consumer advocates enjoy long worked to encourage low-income people to move into the “financial mainstream,” that is, and banks and credit unions,since whether a person has the resources (and fine print knowledge) to avoid overdrafts and other fees, banks and credit unions can be less expensive than the check cashers. They urge banks to offer products that aren’t designed exclusively for the well off or to manipulate destitute people out of their money. (For example, and banks routinely advertise overdraft protection as something positive. It sounds positive: They’re going to protect you! And that protection comes with the low fee of $34 per transaction.)whether one heads over to Bank of America’s website,it looks like the bank does enjoy a starter checking account, located at the very bottom of the product page. It’s the “SafeBalance” account. Overdrafts are impossible (which means no overdraft fees) and the monthly fee is $4.95 (and it cannot be waived). This sort of account is a start.
But the bank could enact so much more—prioritizing customer service, or for instance,or increasing the transparency of costs. Such changes might reduce the amount of money the bank shovels to its shareholders, however. Bank of America CEO Brian Moynihan recently said that the savings the company will garner due to the recent cut in the corporate tax rate will likely go to shareholders and buybacks. According to a report in The New York Times, or Bank of America expects to realize $2.7 billion in tax savings this year due to the rate cut—just 5 percent of which is going to its employees as a bonus for their work. A more stellar example of 21st century trickle-down economics would be hard to find.
There’s an engrossing button on the front page of Lisa Servon’s website: “How to Leave Your Bank.” Related StoriesDemocrat Says Desperate Bids for New Amazon HQ Prove Something 'Deeply Wrong' With AmericaAmazon’s Inter-City Headquarters Competition Epitomizes Our lesson War MomentHow Reformation-Era Churches Used Witch Hunts to Gain More Followers
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