From the comment section of the article -"If you would really like to know why poor people regular these establishments I'll tell you why: it's because they keep you off the grid. I used to have a checking account too all my life. But after I lost my job, even though I'm a fulltime single father, the "child extort" kidnappers levied my checking account several times. They just took money at will no questions asked. There was no rules stopping them and nothing I could do. The Sheriff of Nottingham might as well been barging in me and my daughters tiny apartment and stealing all of our shillings. So after the "child extort" agency did this 3 times, I shut down the account. And from that moment forward I just began to live off the grid using cash and money orders. "

- Moral conflicts. Most banks use your money for purposes that many people consider evil, so choosing to not give them your money is a rational choice.

- Lack of trust. Many banks over the last century have run out of money and been unable to honour withdrawal demands/requests. It's reasonable and logical not to trust them to keep your money and give it to you when you ask.

- Inconvenience. If you don't have very much money, having a bank account is a drain on your resources (fees, mostly) and your money is not immediately accessible.

There are plenty of other reasons, too. Running away from people you owe money to is certainly not the only rational reason for not having a bank account.

The inconvenience argument might be true for some[1] people in some countries but is a complete non-starter in my country where retail bank accounts with a positive balance usually are usually fee-free, as are most forms of transfer between domestic bank accounts, most debit card payments and cash withdrawals from most ATMs. It's hideously inconvenient not to take advantage of all that ([1] I understand that somewhere like the US depositors' costs from basic use of the banking system might sometimes be even higher than those levied by non-bank financial service providers they use instead...)

Granted, the moral conflicts argument has a bit more standing, but arguably only if you apply the same standard of scrutiny to other entities you choose to purchase goods and services from (most of whom will deposit your payment in a bank account...). It's not like there aren't banking service providers that have at least seen the marketing benefits of an ethical stance

Pretty much every developed country has spoken in the last few years of forcing depositors to take losses in the event of bank failures, and some have actually done it. Governmental deposit insurance SHOULD be inviolate, but that isn't the way the regulators are talking and acting.

Meanwhile, how many HNers are currently praying that Mt. Gox will stay liquid long enough to give them back their money?

Suppose you're poor. You do not have the money to support yourself 2 months. You call the helpdesk for cox, they come and repair your cable modem, but somehow they "blame" the problem on you, and that's $250 for riding out thank you very much.

Now let's assess what happens in 3 situations : 1) you have a bank account - the money's gone the moment they say you spent it with them - you have no recourse - you call them - they've got everything they want, you have zero negotiating position - even if you achieve the impossible and talk them out of it, the money's gone for 2+ months 2) you pay by credit card (obviously only available to "the rich", granted, not quite "the 1%", but I'm pretty sure >20% of Americans effectively don't have access to a credit card) - the money's gone the moment they charge you - you call them up, ask what's going on, they don't cooperate - you threaten them with a chargeback - they will suddenly become very cooperative 3) you don't have a back account (with positive balance) - their payment request bounces - they have no recourse - they call you and ask if there's anything they can do - they're pretty cooperative

The "mystery" of why poor people, students, ... go with option 3 is not much of a mystery to me. It's because option 2 is not available to them.

The same goes for being a customer of any service firm. Internet, telephone, car insurance, ...

But not penalty free. A few months ago, I clicked a form twice in my online brokerage and accidentally doubled a ACH transfer from my bank account. Since I was transferring more than half, the double transaction was too much. My bank hit me with a $25 fee.

No big deal to me— but to many poor people a $25 fee could start a spiral of overdrafts which would leave them hopelessly short money. To someone in that situation an arrangement which charged them 5% per transaction would be preferable to one which carried any risk at all of an overdraft spiral of doom.

I don't recall the exact date, but within the last two weeks Marketplace on NPR had an interview with several financial executives about the 2008 collapse. One of the execs had his wife run to the ATM to withdraw the maximum limit ($500) when money market funds broke the buck, and even GE couldn't get short term funding. He was seriously concerned about the ability to get to his own funds.

Being in a developed country doesn't mean your money doesn't have any risk when tied up at an institution.

I guess if you want your money safe, store it somewhere that can do their finances properly?

Within the last century, yes, but quite far back within it: the last time anyone with modest amounts of money in the U.S. lost deposits in a bank failure was 1933, the year the FDIC was created.

You can still lose money in a bank failure if your deposits are above the FDIC insurance limits, but poor people by definition would not have that much money, so it wouldn't explain their choice not to use banks.

[edit: here's the episode, very interesting listen: http://www.thisamericanlife.org/radio-archives/episode/377/S...]

One of those happened just last week:

http://www.fdic.gov/bank/individual/failed/commbank-ct.html

So it seems like in an instance like this, while you get a check for your insured deposits from the FDIC, your bank is gone and presumably any auto-debits or outstanding checks would fail to clear. You get to wait for the FDIC to mail you a check. Then you'd have to find yourself a new bank. This seems like something that would be fairly disruptive even if you are not poor.

Also, if you chose to forgo paper statements to "save the environment" (and reduce the bank's costs), and you were lax in downloading your statements, it would probably take even longer to be reimbursed.

No bank statements or formal claim for reimbursement is needed; the process is entirely automatic and usually done in less than 24 hours.

In most cases, the FDIC takes over the bank and runs it (in a matter of hours), specifically to prevent this sort of impact.

Running away from creditors is not a valid reason. They can sue you. They can't directly take your money.

Assuming your account is under the FDIC limit, how could you lose money on an insured account? Suppose there's a massive bank run and the Fed has to print oodles of cash to repay depositors. This leads to runaway inflation that occurs over a very short period. If you could have otherwise exchanged your cash on hand for a different currency, sure you would have lost money.

Compared with the actual risks of being unbanked, this is a hallucinatory concern.

Since they are making decisions that you don't think are rational ("it's probably rare for the optimal solution ..."), you conclude that the reason is that the poor people are less well-informed.

This makes sense, so long as everyone has equal access to the same services, or at least access to the same services you do, and that there is competition among those services.

However, as the author points out, the poor areas are under-served in terms of banking choices, and banks use "private databases like ChexSystems that currently keep more than a million low income Americans from being able to open accounts."

Because of the obvious market inequality, you cannot conclude as you did that the people who use RiteCheck are making either an irrational decision or un-informed decisions.

A bank account is not that, at all. A credit card is closer to that (because of chargebacks). Prepaid credit cards, and getting a new one every month (carrying over the balance, and because of the number changes, it's very hard to charge you things you don't want to pay for), are better still. Cash is best.

You want to improve the situation of 90% of America's poor ? Find a way to convert a check into a prepaid credit card (with balance transfers from a previous prepair card, ideally), for as low a fee as possible. Make that option available in poor neighbourhoods. When you have that, offer a bank account to them as well, NOT linked to the credit card, fee-free (no-one will care if it's also interest free) that they can save money into.

You propose what you think should be a better solution. This history so far shows that your solution is not clearly better. Just this month "The Consumer Financial Protection Bureau issued a bulletin warning employers against using only so-called payroll cards to pay workers." ... "Complaints received included fees for withdrawing cash and checking card balances. Critics say payroll cards with high fees mean that some workers are essentially making less than minimum wage." -- http://www.usatoday.com/story/money/business/2013/09/13/agen...

Yes, there can be a time where that's a better solution than a check.

However, we are not yet at that time, so it's not a rational choice NOW.

Prepaid cards, fee-free for the user. Seems like a basic necessity for an economy to work smoothly.

What I was saying in the parent comment is that overdraft fees are a perfectly rational motivation to avoid major banks.

I personally bank with both Wells Fargo and Bank of America (for convenience, and because several family members that are international do the same; gotta have that free transfer service). I am close with a few people that have foregone banking, and paid out of pocket to have their paychecks cashed where ever they can. As far as I can understand, this is a rational decision if your income does not provide the ability to meet a minimum monthly balance of about $100 of 'slack'. If you've ever worked a menial job for a regular period, I'm sure you'll understand.

If your monthly balance variance is < ONE PAYCHECK +/- $50, a $35 overdraft fees represent a significant percentage of your income.

These overdraft fees are a profit center for banks. Even if there are options to mitigate them, what motivation do the poor have to pursue them? The burden of proof of utility is on the banks, as far as the poor are concerned. If it seems to be more convenient or cheaper to operate without them, people will. This may be partly due to ignorance, but for the most part, it is because there are small inherent costs associated with a bank account that the middle class doesn't seem to recognize.

You CAN operate with less expense with cashed checks and payment cards than you can with a bank account and a debit card. Hobos and junkies would not do so if it were not the case. Hard living makes people rational like a motherf*er. You may forego some potential interest incomes, bank protections, and countless conveniences associated with using a bank account, but when it comes down to brass tax, it just costs less.

While studying, I was quite poor, and rarely had any reserve cash on me. In an effort to secure me against emergencies, I borrowed a small amount from a friend and put it in my bank account. It was not to be used except if the house burned down and I needed a motel or if some other unlikely event occur.

After my studies was done, I was unemployed and thus went and sought some social security money to pay rent with. When the first check came in, it was reduced with the amount I had in the bank.

TLD: paper trails are contextless, and do not always paint the correct picture. Giving the state this information can be quite costly on a personal level.

When I returned it to my house nine months later, I found a wide variety of letters from them culminating in lien on my bank account for about $1500.

Why they decided that I would have $10,000 in sales that were taxable, given on my history of never having reported anything ever on a brand-new account, I have no idea. Strangely, others at the show who also failed to ever file did not receive liens.

In the short term that may seem like a good idea, removing slack appears to increase efficiency. But in the long run it is socially destructive -- we are all people, not just numbers and reducing us to numbers ignores much of the realities of life. When you can't take into account the realities of life, then the imperfect systems that the databases model as perfect fall apart.

I'm still convinced that your point is correct, but it only works in combination with the utmost transparency.

In Sweden, most ATMs is set at a maximum withdraw of 100$, while a few is set at $300. The bank itself also adds additional restriction of maximum $2000 per week. If you want to withdraw more of your own money, you have to ask permission and give a reasonable explanation why one is taking out "that much cash". Only if the bank approves of your reasons to withdraw money will you be able to do so.

All withdraws are of course logged, stored, traded and given away for inspection. I can also be held, for any reason the bank can think of or from outside pressure (like the Wikileaks visa scandal).

I fully understand why more and more people chose to avoid banks. Banks are services. If you voluntary give away your money to be owned and controlled by a third-party, they will indeed do so.

corrected: month -> week

I think you did a conversion error from SEK to USD. Did you mean $1000 at a time?

The documents you referenced say Swedbank has a max of 8 000 SEK/day, Nordea's is 5 000 SEK/day, SEB has 10 000 SEK/day, and so on. (Under-16s have a limit of 1 000 SEK/week.)

That would correspond more to US$1,000 than $100.

FWIW, I had a limit of $200 or perhaps $300 when I lived in the US.

According to https://www.tcfbank.com/customer-service_tcf-convenience-ser... , a US bank, "The daily withdrawal limit varies by account. In general, you can withdraw a maximum of $500 daily." I think this is typical.

I've never pulled out more than $2000 per week from Swedbank. I do know they are an anti-cash bank, and want to get rid of handling cash. ("It's environmentally better if we don't have to drive the money around" and "It's safer because it prevents people from being robbed.")

Sweden doesn't even really like bank machines. See http://www.thelocal.se/50228/20130913/ - "Sweden second worst in EU for ATM shortage":

> pensioners staged a protest after another automatic teller machine was recently bricked up. Their actions prompted the Nordea bank to pledge to open a new ATM before the end of the year.

> Sweden is among the main countries leading the way for non-cash payments. Several businesses will now only accept cards while some bank branches don't handle cash at all.

> Swedish researcher Niklas Arvidsson recently wrote a report suggesting that the country could be cashless by 2030. However, he added for that to happen a complete ban on cash was likely needed.

However, I think you slightly missed my point. I do not say that Sweden is worse than the US. I merely wanted to point out that banks actually put in some real restrictions for taking out cash from ones own bank account. They are not holding my money for safe keeping, but rather providing a service where my money goes in, and I can get some out under circumstances they dictate, and only if they agree with it.

http://www.swedbank.se/privat/kort-och-betalningar/kort/om-k... says you can take out up to 8 000:- per time, and up to 15 000:- in any 7 day period.

ICA's web site (just for reference, I have no real point here), at http://www.ica.se/ica-kort-bank/icas-kort/insattning-uttag/ says people with an ICA bank account can take out up to 3 000:- per occasion, and at most 15 000:- during a 4-day period.

You are right in that I didn't understand what your point was. Thank you for the clarification.

My updated point is that when I lived in the US I also had limits in what I could take from a bank machine. If I wanted to get more than that, I had to go to the bank itself.

You write: "If you want to withdraw more of your own money, you have to ask permission and give a reasonable explanation why one is taking out "that much cash". Only if the bank approves of your reasons to withdraw money will you be able to do so.", but what you've been pointing to have been bank machine limits, not cash withdraws.

It's not that I don't believe you. I know that Swedbank wants to get rid of dealing with cash. But do you have a reference for having to justify to the bank your need to withdraw the money?

As an extreme, and admittedly not likely case, what happens if they say "no" and you respond "I wish to close my accounts. Please give it to me in cash."?

(BTW, I live directly over a Swedbank, which makes it very easy to get to their own bank machine. :) )

When someone wants to withdraw more than the maximum per week, my guess is that the bank feels they need to ask questions to fulfill the requirements of the law from 2009 (http://www.penningtvatt.se/) that requires that bank to inquire the nature of the withdrawal. SVT had a story when the law was introduced, and their conclusion can be read in the Q/A at (http://www.svt.se/ug/chatt-om-penningtvatten).

I don't know what happens if you close your account, but my guess is that the law would still hold the cash in place.

Thanks for the links! At the very least it helps me understand the relation between Swedish and similar US laws.

In the US, if you deposit or withdraw more than $10,000, or do transactions that appear to be done to get around the limit (like successive transactions of $9,999; so called 'structuring'), then the bank is obligated to file a report.

However, that report is filed in secret to the Feds.

It is possible for a US bank to freeze an account that they suspect it being used for laundering. That's different than having a teller decide on the spot if something is suspicious or not.

Are you aware of people who haven't been able to take money out of their account because they didn't want to tell the cashier why they were doing it?

If for some reason you need a bunch of cash from an ATM, you can generally call your bank and have them temporarily raise the limit.

"The elimination of withdrawal limits enables the participants to withdraw literally unlimited amounts of cash until the operation is shut down," the U.S. attorney's office said.

I regularly withdraw money from ATMs in excess of 500 USD equiv.

I have not heard of this 2K USD equiv. / month thing either, is that the policy of your bank or is it regulatory? Do you have a source?

EDIT: I live in Sweden

The 8000kr per withdraw is for ATMs on the bank buildings. More common is those outside malls/shop, like ICA (http://www.swedbank.se/privat/kort-och-betalningar/kort/om-k...). However, I have seen some who increase those restrictions to half, so its a bit 50/50 if you get 1000 kr or 2000 kr (divide with 6.5 to get US dollar).

PS: This can also (and should also) be done on your credit card accounts.

c. June 2011 I got quite involved in the Bitcoin scene and arranged to meet up with a guy at a local establishment and buy a large quantity of BTC from him. I walked into the bank and asked for $11k in cash and there were only two (small) things out of the ordinary: 1) the teller explained that she didn't have that much cash at her station and it would be a few minutes while she went to get it, and 2) a quick, non-invasive question about my intentions in an attempt to make sure I wasn't about to be the victim of a scam.

Also, I would never open an account that is not 100% free to run. I anything happens, I don't want my account to be eating into my savings. So far, I am successful - my current account doesn't cost anything to run, there are absolutely no fees for withdrawing money at ATMS, and my Visa card costs $0.50 per month,but only if I don't use it to make at least $30 of payments each month,which I always do. So I never pay any fees.

He tells me that on the last day of every month, there are a number of people who come to the gas station starting as early as 9 p.m. and simply "hang out". They wander in and out of the store but mostly linger in the parking lot, chatting with others in their large group, and simply trying to entertain themselves, in general.

Naturally, I asked him why they would do this. Apparently their government "checks" are now "deposited onto their card" (a debit card, basically) at exactly midnight on the 1st of every month. They know that at 12:01 a.m. on the 1st, their money will be available and so they hang out at the gas station in anticipation of being able to load up on cigarettes, basic groceries (more expensive than a typical grocery store, of course), lottery tickets, and such.

http://www.npr.org/2010/10/02/130272928/midnight-shopping-on...

Much of Europe pays for POS transactions with free, fast bank transfers from their smartphones in lieu of credit and debit cards. No checking account, routing number, and 3 business day verification crap.

Transferring from them to BoA or another institution likely wouldn't work but I have no expectation that it would (at least not without meeting in person etc).

I logged into WAMU's web site to find out the amount and procedure, printed off the reply, and took it to the bank. The nice lady in the banking lobby took my printout and did the transfer. The fee was $15, IIRC, in 2007.

Wire transfers do entail some extra work, because the transaction is cleared in real time, whereas ACHs and bill-pays and paper checks are cleared (or bounced) in large batches that are processed daily.†

†http://www.depositaccounts.com/blog/difference-between-wire-...

Perhaps that has something to do with it.

1) Many poor people mistrust banks, for reasons ranging from cultural ("Where I come from, they're far more likely to vanish with your cash than the mattress") to personal experience ("I was just going about my business one day but then I ran the account a little low, $300 vanished in fees, my rent check bounced and I got arrested for 'uttering.'").

2) Banks have some assumptions made about their customers which are institutionalized by practice and sometimes regulation or policy. These assumptions map fairly well to the middle class but sometimes don't travel well. Here's four things I could tell you about an adult member of the middle class: they're literate, have a primary address which changes relatively infrequently, carry identification with them, and do not fear speaking to Authority because they're not cognizant of a reason why that should result in their immediate arrest.

3) "Free checking" was a multi-billion dollar ongoing wealth transfer from poor bank customers to banks and relatively wealthier bank customers. ("Free checking" was a marketing tactic very popular in the 90s and early 2000s where banks eliminated monthly fees for checking accounts while slashing minimum balances to open them. The flipside is that they then started cranking up fees generated by e.g. overdrafts. This combination generally tends to not be to the benefit of (many) poor people.)

4) The alternative financial sector has a product mix which more closely matches poor people's needs than traditional banks. For example, short-term loans for small amounts of money available with minimal documentation required are a) astoundingly high risk, b) relatively expensive to process, c) have fairly low margins, and d) carry explosive reputational risk. These counsel against the typical retail bank even trying to offer them. Much better to loan a middle class American $8k out of a credit card limit of $20k at 12% with a 3% loss rate then to loan a poor person $100 with $110 due a week later. (If you APR-ize that it becomes "A number which one never, ever wants to get asked about when you're called to testify before Congress about how you're causing poverty in the community you serve.") Business thus flows to the alternative financial sector.

5) (The literature is a bit circumspect about this one, but it's there.) Sometimes poor people make decisions which, if you appreciated their limited options, individualized viewpoints of the world, and the sociocultural context and structural issues at play... are still very effing bad decisions.

Now for her, going to Walmart every month and putting her earnings on a prepaid card gives her everything she needs with little of the risk. And so that's what she does. It's not a "check cashing place" or "payday loan" place, but it is one of the places siphoning the poor from the banks. (My guess is that it's probably siphoning a lot of them too).

I think sometimes it's a little easy to lose sight of that single mother with three kids working a low end job. She really can't afford fees like that... though the fees may sound trivial to the middle class. When she gets home, she HAS to have food for her children. And among a lot of what you might term the "responsible single mothers", anything that would put their ability to do that at risk is, rightfully, eliminated.

Bank accounts, in their current form, are on the list of things that can put that at risk. And so, bank accounts are eliminated.

After that conversation, it was not clear to me that she had made a bad decision. I couldn't really question her priorities. A bank account was good for me... but maybe not for her. This is why I think that these sorts of decisions will be made more and more often by the poor. Because they only care about the ends, (feeding her kids). Not the means, (the bank account).

I guess I'm just saying that...

It wasn't clear to me that it was an... "...effing bad decision."

This is a real big problem in these kinds of situations.

To give you an idea of how this happens: when I was in college, I worked at a pizza shop. It was Thursday. I got paid Friday. I thought I had $20 in my bank account, but I didn't realize that day was the day that my World of Warcraft subscription was up, and that was $15. During the course of the day, I bought lunch, a snack, and some pencils or something. All that total was less than the $20, it was something like $10 for lunch, $2 for the snack, and $5 for the pencils. So I was good.

I wans't good. They applied the charges like this:

  Starting Balance: $20 
  WoW:             -$15 
  ---------------------
                    $ 5
  Lunch:            $10
  ---------------------
                   -$ 5
  Overdraft fee:   -$35
  ---------------------
                   -$40
  Snack:           -$ 2
  ---------------------
                   -$42
  Overdraft fee:   -$35
  ---------------------
                   -$77
  Pencils:         -$ 5
  ---------------------
                   -$82
  Overdraft fee:   -$35
  ---------------------
  End total:      -$117

  Starting Balance: $20
  Lunch:            $10
  --------------------- 
                    $10 
  Snack:           -$ 2 
  --------------------- 
                    $ 8 
  Pencils:         -$ 5 
  --------------------- 
                    $ 3 
  WoW:             -$15 
  --------------------- 
                   -$12
  Overdraft fee:   -$35
  ---------------------
  End total:       -$47

Of course, they never cancelled service so a year later I get collection phonecalls that I owe them $1,000. Regardless of me disputing the bill they instead debited my bank -$1,000 which I had no idea they could do since I didn't have overdraft. What they did was wait until 11:59pm the day before I was to be paid out $800 direct deposit from my pitiful p.t job and the bank allowed it to go through, then charged me interest on the negative balance for those few hours where they overdrafted the account.

I woke up to -$280 in my account in overdraft fees and the theft of my money from that telecom. Being that I couldn't feed myself I had to go out and do cash loans at extreme interest and was in a cycle of poverty for 3-4 months after that until finally got my money back from those assholes. I closed my account after that and asked to be paid out in cash from my job instead.

That's one of the biggest problems with poverty. You can get stuck in the trap and you can't work your way up. Often things get more expensive as you have less money. You can't buy things in bulk and get the savings of economy of scale. You can't afford to go further to get a cheaper thing. You can't afford to get that item today even though it's cheaper. You can only afford short term, more expensive solutions.

Good on you for closing that account, and clawing your way back to solvency. One day you'll be wealthy, and that same bank will come a-knockin'. Tell them to go pound sand.

Banks are just awful things for people who are poor. There really isn't much point when you live payday to payday and you have zero dollars by the time payday comes.

You have to pay $3 for ATM fees and you may forget exactly what you have in the account, overdraft by $1, and then get hit by $150 overdraft fees. It would be helpful if the ATM showed the real amount of money left on the cards, but no, they showed one number then another number the next day.

I still don't know what banks can do for me, but I thought the idea was a safe haven to keep and save your money. All I've experienced are predators who take my money and then refuse me basic services.

As for the reason for reordering, since I didn't use it for anything high priority, they couldn't use that story on me. The bank blamed the merchants and the way that the system ordered the money. I cried foul, saying that I can't believe that a bank, who's singular expertise is managing money, can't figure out how to add and subtract a few numbers.

As an experiment, try this for three months: Open up a bank account, put $150 in it and use it for paying for the bus, your food, clothes, soap, shavers or whatever expense you may need. Of course, if you get hit by the overdraft, you can't pay it. The next month, put $150 in the account and live off that minus the overdraft fees. See if you can manage it and then come back and tell me poor people are making a stupid choice by keeping the money in their wallet.

The stupidity comes from the wretched check cashing agencies (aka liquor stores). Pay us for access to your money, minus 3% for our trouble. What a racket!

I remember this being in the news several years ago. I don't remember if anything came of it, maybe somebody else here does. But, personally I did opt out of all overdraft services from my bank - so if I did run out of money my charge would simply be denied. As far as I know this never results in any penalty. Any automated billing I have set up seems to be fault-tolerant and will just notify me to verify my card information and re-try the charge a few days later.

I got hit with several overdrafts after some tickets I purchased finally got charged a month after I purchased them. Even better was that I never got any text messages to warn me. I set up alerts for low balances and whatnot, and somehow this was the one day it failed to work. If it had, I would have transferred money from another account and avoided any problems. I've been meaning to find a new bank (or credit union) since.

My brother didn't have an account but he needed someone to cash a $3K check from an acquaintance of his. He told me he'd give me 10% if I did it, and I was dead broke at the time. So I do it and the next day my bank (one of the big names) lets me take it all out, at which point I give it to my brother and he gives me $300. On the same morning, the check-writer cancels the check and the bank hits me with a -$3,000, plus overdraft fees. A week later they closed my account of good standing of 10+ years. My brother spends the money, refuses to pay it back and swears he wasn't 'in it' from the start with his buddy, the check-writer. That was 4 years ago and I haven't spoken to my lovely brother since. To top it off, I wasn't able to open another account in the US for a few years.

http://consumerist.com/2011/11/10/bofa-scraps-plan-to-let-cu...

I went in to fix it and they realized they double cashed my rent (still not sure wtf that was about), and they added back on the amount of the rent. It took another 2 weeks to get the fees removed. I had to call and visit 8 times. Being $175 down in 1988 was not fun.

I switched banks, but as a student I am pretty sure these days I would have used something from Walmart or another group. I bank with a credit union now and they are amazing.

I no longer allow any automatic payments from my bank account because of this issue. Maybe one is ok but if you start to have 5 or 6 monthly payments automatically coming out of your bank account, it can be hard to keep track.

Also, if they make an error and you are dealing with a large company, it is probably going to take months to get the money back whereas paying invoices leaves me in control and I can choose not to pay if something is wrong.

If I do have a subscription, it just goes on my credit card and then I pay at my convenience. This also allows me a buffer in case of any unexpected emergencies should I need some extra cash flow. I could pay the minimum monthly amount for a month or two should I need it.

I really don't know why people do this. Let's let some large company have direct access to debit my account at will.

(Sorry for the tangent but I feel strongly about this)

I agree though, I like to trigger my payments.

Pew has a nice little infographic depicting your exact situation: http://www.pewtrusts.org/our_work_report_detail.aspx?id=8589...

Banks mostly stopped transaction reordering when it got a lot of attention post-financial crisis, but they're slowly going back to it, so some orgs and the CFPB are starting to shine a light on the problem again.

http://www.forbes.com/sites/halahtouryalai/2012/02/22/are-ba...

I'd be happy if I could just turn off overdraft "protection" altogether.

I don't like this ends/means thing here. I mean bank accounts aren't 'ethical things'. Not having a bank account isn't 'unethical'. In the context of money people only see accounts as an ends. Very few people have a bank account "just because".

For example, PayPal: https://www.paypal-prepaid.com/prepaid-debit-card/paypal_fee...

Really, if asked, I don't know anyone struggling financially who has a line-item in their budget to cover not having money. Maybe overdrafts should be capped and charged the going annual interest rate for short-term loans. If I understand correctly, that is how they are handled in Germany.

nowadays they have only consideration for "profit per account".

and he says thats because banks are now almost required if you want to get paid for your job, so you dont have to give anything for free anymore.

In other words, all of this is not brought about by myopia, but simple business decisions.

Fully experiencing bay area traffic for the first time, I was pretty annoyed, so I went into 1. my national bank of multiple years, 2. a local credit union, and 3. The dealer itself to try to get a brief loan so I could get a nice sportbike. I make a decent salary, and have been working since I was 13.

Every single financial institution made me fill out my residence history for the past two years, which (on their paper forms) was a several hour process and a huge pain in the ass - why does it matter where I lived when I was eighteen? I'm not sure I remember the names of the people I was living with, much less the landlord's secondary phone number. It seemed especially pointless with my main bank, because they had full historical data on my salary, and knew damn well that I could pay off the loan in full with a month's salary.

Long story short, all of these places denied me for not having lived in the same house for multiple years. I waited a week, got a bonus, and bought one from a different dealer in cash. The next time I need a loan, you can bet I won't be going to any of the companies I visited previously.

It's ridiculous to make financial judgments based on length of residence at an address in 2013 when there's so much more accurate data available (actual income/purchasing data). I think this is a policy that's going to change - many if not most of my highest-earning peers move around frequently to meet needs of the modern job market.

There's definitely a mix of opinions out there on this, but there have been some good challenges against community lending targets as a significant cause of the crisis.

Somewhat more polemical: 1. http://www.forbes.com/sites/stevedenning/2011/11/22/5086/ 2. http://www.washingtonpost.com/blogs/wonkblog/post/no-the-aff...

Wikipedia can sometimes provide a pretty good record on controversial topics with sufficient visibility.

The current article on causes of the US housing bubble, and specifically the section covering loan policy, cites useful literature on both sides. While it's not a completely one-sided argument, it appears the weight of the evidence goes against the CRA and similar government initiatives as a leading cause of the crisis: http://en.wikipedia.org/wiki/Causes_of_the_United_States_hou...

At the very least, given the number of other sections on that page, you should conclude that the CRA wasn't the sole cause of the crisis.

Note from the same page, (and in some of the above polemics), it seems like there's a similar cry to blame deregulation for the crisis. There are reputable economists, even Bill Clinton claiming that the repeal of Glass-Steagall probably wasn't sufficient to cause the crisis. Regulation and deregulation make suggestively convenient bogeymen for the right and left respectively, so they should draw a sort of heightened scrutiny.

Events like this are naturally complex. Alarm bells should ring if anyone boils down the entire crisis to something so simplistic as "too much or too little government." Some problems and some solutions don't fit conveniently on a postcard.

Shareholders aren't always even citizens (can be foreign, can be other businesses).

Hell, I'm having trouble keeping a steady place to live because I'm an intern in the Bay Area for 2 months at a time. Housing market is too hot for anyone to have offered rentals even loosely timed to what I needed.

And then, even if you (the low-income person) avoid the overdraft fees, eventually monthly fees start appearing. So far, in 10 years of using banks, I've twice closed checking accounts because they started charging monthly fees. I might try a credit union next time I need a bank account.

Keep a $3000 minimum balance or have a regular job depositing money into your account electronically, and the monthly fees disappear. Banking is, in absolute terms, too expensive for the poor.

I guess at the end of the day, poor people present poor revenue opportunities for banks. So the banks resort to underhanded methods (ie ones that customer would not agree to if they were given a choice). In turn, these customers learn to mistrust the banks and turn away.

#4 is a lot of why Kiva exists and works here in the U.S. as well as the rest of the world. By being charitable we can offer these higher risk loans, and in the end we end up still having a very high repayment rate.

I also mistrust banks. Most banks are confusing and make it difficult to tell exactly how much money you can spend, and then lie in wait to hit you with overdraft fees. For now, I'm trying out Simple Bank, but they're in closed beta. I don't personally know anybody who wants to use the invitations that came with my account.

I'm also suspicious of "know your customer" laws and all that tracking information. I reduce the amount that they can know by keeping a small amount in cash, to use when shopping locally.

It's not just the US - as patio11 knows, here in Japan, the banks charge you a "convenience fee" for using the ATM when the bank isn't open.

Using an ATM vs a teller actually SAVES them money. This is the most ballsy thing I've ever seen, and exists only because most Japanese don't realize it isn't normal

After it was all said and done he ended up owing the IRS ~$14k and they gave him a check for the difference, but it took months to get it all sorted out.

I lent him some money to get him through it, but what if he didn't have a friend to do that? He'd be kicked out of his apartment and starving.

Now he doesn't trust banks (not that it's the necessarily the banks fault). He keeps around a thousand in his bank for emergencies, and keeps the rest in cash (at an undisclosed location :)).

It goes to show that even people with a reasonable amount of money have reasons to keep their money out of banks.

She lamented the time when banking was a personal experience just like the article wrote. You went your teller, you'd known for years, they'd ask about your kids. The manager migth know you, might send you a birthday card and so on. I can see how she would be a person willing to pay $5 per check just to get back that personal touch.

The article also touched on this, but many people who are poor also don't happen to see a lot of human kindness, sometimes fake customer service kindness is better than nothing, they don't even mind paying extra to get it.

There's no reason to pay some megacorporation to treat you impersonally.

In the end, it would be a low-risk, vanilla, 30 year conventional mortgage, and we had enough cash for a 20% down payment. It just required some complexity to set up.

Not surprisingly, most major banks wouldn't even try to help us once we explained what we were trying to do. It didn't fit any "profile" they had and the "system" was unable to let them continue. We lost count of the number of times we were told that a "system" prevented them from doing something.

So we went to a local bank - only one location, right in the middle of town. We sat down with an older guy who's probably been making loans in this town his entire life. The president of the bank came over and talked to us, and congratulated us on our coming addition to the family (my wife was 7 months' along at the time, so very clearly pregnant).

After talking with us for an hour or so, before having even filled out any paperwork or pulled any credit, they were confident they could help us. They were even more happy once credit had been pulled, and offered us rates lower than any of the big banks were offering at the time. What we ended up doing was writing a 4-month construction loan for the purchase price of the house plus the cost of constructing the garage. A few months later, when the garage was completed, we closed the loan and had a single mortgage for the whole property.

So after that experience, I've started recommending my friends and family stay away from big banks and work with local banks and credit unions. Big banks may be great for the convenience factor of having branches everywhere, but they fail hard when it comes time to do anything remotely out of the ordinary.

This will ultimately be the downfall of 'computational governance.'

Sure: this author doesn't generally interact with her bank. She doesn't see the need to, so she isn't choosing to; but, the bank she is using does have a branch she went to, and if she actually went there at all often the people there would get to know her. The building might be "impersonal", but the people are still people.

This doesn't even just apply to small banks (a friend of mine has always used local banks): I use the Bank of America, and almost everyone at my local branch knows me because I go there often and actually talk to them. I seriously look forward to making a wire transfer because I enjoy the interaction with the people I know there.

Corporations with local offices are still made out of people; like, while I prefer automated payments, if I end up in a situation where I need to write a check, somehow that's on the other side of "I may as well drive to your office and hand-deliver it"; this meant for a long time I even knew the people who worked at my car insurer ;P.

In fact I hate it when I have to talk to a banker, I get annoyed when they try to sell me services that have nothing at all to do with what I went in for, or with why I'm a customer in the first place.

Also, I suspect because of turnover, they usually can't answer my questions when I ask. They just do not know the answer to "how do I do this particular bank-like thing" without researching and asking the branch manager. But man they do know all about their insurance products.

I'm not sure what the banks use to determine whether they open/close a certain branch. Everyone jokes that 'The First National on MLK Boulevard got robbed twice a month so they shut it down', but I'm sure there's some real process with population density and more importantly, income density.

When you cash your check at a liquor store, two things happen - you end up buying things like food for your family (as well as beer + cigarettes + lotto) and they take a % cut. The bank doesn't have anything for you to buy and they don't take a cut.

This also means the poor can't pay their bills online. Again, in the bad side of town on Fridays and on the 1st and 14th of the month, there are massive lines outside the power company, city water department, and cable company. Everyone's standing there waiting to pay their bill in cash. While the rest of us pay everything from our smartphone or have it directly taken out of our accounts, they're spending two hours in line during the day.

I'm much older now, and have a bank account, mortgage, credit cards, and all that jazz. Just a silly anecdote that it's actually possible to be too poor to be allowed to have a bank account.

You also didn't have any credit history. That's something that young people could be taught: "How to get a good credit rating, without being stupid and getting into tens of thousands of dollars of unpayable debt".

The UK has the concept of "basic bank accounts" which are needed so people can have state benefits paid to them. These accounts don't allow debt; don't have credit or debit cards. (Except HSBC I think does issue a debit card with its basic account and other banks probably do to?).

In South Africa, banks are desperate for young customers and all of them have no-fee high-interest savings accounts for children, no-fee checking accounts for students, and so on. On university open days and orientation days, all the major banks have a large presence encouraging students to sign up for these. Most customers never switch banks after opening their first account, so it's highly worthwhile for the bank to be attractive to customers who've never interacted with a bank before (especially if they have money to save as children, so are likely middle or upper class, or are attending university, so have future earning potential).

I'm surprised this is not the case in the US (Wells Fargo quite happily gave me a no-fee checking account just after the financial crisis began, when I did an internship in the US -- I assumed the reasons were much the same).

It has no fees, so long as I don't go overdrawn. It had a regular cashpoint machine card, which they've just replaced to be a visa debit card. It has online banking.

Birthday cards, get well soon cards, calling the client and asking how they are, helping them with last minute account stuff (like making their visa have a higher cap so that cruise trip can be insured).

I think a lot of banking should be like this. I doubt it ever could be, as most banks have very few people, but specialized areas, like this rite-aid, or some wealth banking, have the time to dedicate to these people.

Treating people like people, whether it is restaurants, or banking, or anything, makes a business less like a service and more like an experience. It should be something a lot of startup companies on hn should look into.

But finances for most middle-class people are plain vanilla - one or two checking accounts, credit card, simple mortgage. They do not live paycheck to paycheck so no bounced checks. There is not much space for personal interactions, especially profitable ones. Get paycheck every two weeks, pay all the bills, move whatever left to investment account. The last time I was in the bank was three years ago to do international wire transfer.

Good analogy - when I was poor student with crappy car that was constantly broken, mechanic was important person in my life. Car repair expenses in some months were bigger than my monthly budget and having rapport with good mechanic was important. Now I have newer car that pretty much never breaks and I do not give a damn who changes my oil as long as there is Starbucks nearby.

I'm about to be in difficulties with a current credit union, we'll see how they treat me as my clients keep their outstanding debts to me just a little more outstanding.

1) Just as all the world is not a Vax, all the world is not you and your circumstances and acquaintances and anecdotes.

2) as the article briefly touches on, many people simply cannot get a traditional or even minimal/basic bank account because of entries in ChexSystems. These entries may be correct and current, or they may be old, or inaccurate, or not reflective of current circumstances. And banks are only too happy to outsource the expensive process of judgment and "knowing their customer." No banker ever got fired for following ChexSystems' recommendations (I assume).

Here's why poor people don't like banks: because banks don't like them.

Let me paint you some pictures.

You're not clean-shaven. You smell a little bit, whether because you just finished a smelly job or because you're living on the streets or because you're depressed and haven't bothered to clean up in a day. You enter the bank, and no less than four pair of eyes look at you -- eyes that are surrounded by expensive haircuts, ties, and nice dresses or suits.

You're exhausted and you can't concentrate well. Maybe it's the chronic lack of sleep, maybe it's malnutrition, maybe it's stress, or maybe it's drugs or alcohol. You walk up to a counter with a check in hand. This paper is worthless to you, what you need is a different kind of paper that you can trade for things you need.

The teller asks you if you're a customer. She's polite, but polite in that barely perceptible condescending way that people are when they're uncomfortable with the person they're talking to.

You're not a customer. She'll have to charge you for cashing the check then (or maybe won't do it at all -- depending on company policy).

Can you be a customer? She directs you over to a desk. The desk has a nice finish on it. It's probably worth more than anything you own. It might even be worth more than everything you own.

You sit down at the desk and another person with a polite smile, perfect hair, and a nice tie or suit or dress asks you for some personal information and enters it into the computer.

You're poor, so you hate computers. They keep track of you everywhere you go. You can't seem to escape them. The police in different towns all somehow have access to the same information about you. Computers produce paperwork that occasionally makes it into your P.O. Box, or last address, or friend's address, and usually it's bad paperwork: more bad news, more stress, more trouble. Some faceless agency somewhere wants more of what you don't have.

This computer is no different. A few keystrokes later, the representative apologizes in that polite-but-condescending way: "I'm sorry, you're here in Chex Systems for account abuse at BigCorp Bank three years ago, we can't open an account for you."

This is the sixth bank you've been to.

Three years later, after a little bit of luck and a lot of hard work and a struggle that will forever leave a scar on your soul, you've finally reached the five-year expiration period for Chex Systems, you've finally got a regular job with a regular paycheck that is just barely enough to live on. You're set up with free checking at some bank, but you're very very careful not to overdraw your account, ever, because that one time you did it suddenly somehow turned into $250 of money that you owed the bank -- money that you didn't have, because if you did, the bank wouldn't be asking for it.

But this morning, your beater car finally crapped out for good and the low-rent apartment complex you live in forbids you from working on it in the parking lot. You can't get to work without the car. You have a little bit of savings, about $100, and you just need to borrow a little bit of money so that you can get another beater and get back to work as soon as possible. Your job doesn't offer paid sick days, so every day you're out of work, you get a little bit poorer.

You walk or get a ride down to your bank and you sit down behind that desk, and that computer that you still hate, and you ask the polite-but-still-a-little-condescending nicely-dressed person if you can get a car loan. You quickly add, "I don't need much, only a few hundred dollars, and I'll be able to get this car I saw down the street from my apartment." You make promises and tell the representative how important this is to you, because you're under the mistaken impression that the representative has the ability to make a decision. But it's not up to them, it's up to the computer.

The representative politely tells you that they don't do car loans for a few hundred dollars, they only do loans for a couple thousand. You don't need a couple thousand -- in fact, the very idea of borrowing that much is really scary to you, because you're pretty sure that if somebody gave you that much money you'd mess up with it, just like you always do, and then you'd owe a lot of money that you'd have no way of paying back.

But the representative tries to get you a couple thousand dollars for a car anyway. The computer says no: you don't have enough credit, your credit is too bad, you don't make enough, you don't have collateral. In short: you are too poor.

It doesn't matter that you're a customer. It doesn't matter how hard you're trying. It's just like all your friends say, it's what you hear all the time: banks only lend you money if you don't need it.

--

That was me. For years. I'm reasonably intelligent, I've never had a drug or alcohol problem. Still, though, I made a relatively simple decision many years ago, to take a vacation from the computer industry for a while and be a climbing instructor. Unfortunately, while being a climbing instructor was amazing and I'm still glad I did it, it didn't pay very much, and eventually I got into trouble with a bank.

The economy started to have trouble then (dot-com bust), my computer skills were more of a liability than an asset, and for the next several years I struggled desperately to keep my head just barely above water. I was homeless for a while.

I've got my own business now and my finances are better and I still hate banks. I love the people at my local bank, but I hate banks.

At one point I mismanaged my finances and completely destroyed my credit score, as well as getting listed in chexsystems for overdrafting a bank account and not being able to pay them back for several months.

To cash my paychecks (I got paid mostly in tips), I used a check cashing place or the grocery store. I did this because being listed in ChexSystems prevented me from opening a bank account.

Once I became I developer I dug myself out of debt and then rebuilt my credit score. Eventually after waiting long enough I was able to get a checking account from a bank that used FICO scores instead of ChexSystems.

The article is a bunch of crap. It reads just like that nickel and dimed book by Barbara Ehrenerich[sp]. How an academic cannot figure out that the reasons these poor people are giving for not having a bank account is false? There is one reason: they are listed in ChexSystems and can't get an account.

Check cashing places are a lot less formal than banks (when formality is intimidating), and they tend to say "no" less often. They're more of an ally to the poor than most people would think.

But, yeah, the article should've mentioned Chex Systems.

> eventually I got into trouble with a bank

Could you elaborate on this? I'm very familiar with the CRAs and how they operate, FICO, etc., but I know very little about Chex. What kind of "errors" do these entail?

I'm not asking about the details of your personal case - I'm just trying to understand what a typical experience with Chex is like, since I have no firsthand knowledge and you seem to.

My funds eventually ran out, and they both were overdrawn. Not by very much -- $20 to $50 each as I recall -- but with fees & etc., it grew to more than I could resolve. One of them grew to over $500 of debt. (I stopped using either account as soon as they were overdrawn; I didn't write $500 of bad checks.)

I simply wasn't making enough money to do anything about it, and had no friends or family to turn to. (Well, that, and I was too proud to ask for help.) So, I walked away from it. I didn't know about Chex Systems at the time, and didn't realize that doing so would mean I wouldn't be able to open accounts elsewhere for about five years.

I think some banks do now offer options for people listed in Chex Systems, but at the time that wasn't the case.

I'm not sure what the range of abuses are that Chex Systems tracks. I was told more than once that mine was especially egregious, probably because it involved accounts at two banks, and because one of them racked up a pretty big sum.

About a year ago I walked into "my" bank (hah!) and a guy pulled me over to his desk and "invited" me to sign a form (he said was mandatory) accepting or rejecting a $35 "overdraft insurance" fee. I "invited" him to check his computer and see how many overdrafts I'd had in the past 10 years ... and that my "insurance" was keeping my checkbook balanced.

Not sure what game was afoot there, but I'd bet that some of the people who were treated to that strong-arm tactic resigned themselves to paying that monthly graft. Vampire squid indeed.

The benefits of paying a percentage to get your money a couple of days earlier are clear enough. But the avoidance of overdraft fees may be the key. When paper cheques have had their day and every non-cash transaction is software talking to a bank server, there will be no need for unarranged overdrafts to exist for every bank account. Accounts that carry no risk of unplanned fees would be a disruptive innovation, given that retail banks seem very addicted to the profits from overdraft fees.

So how does the bank make money off me? It must be by investing the money they keep for their customers,because I certainly am not paying them anything. I've had an account with them for the last 5 years, and paid exactly $0 in fees.

I thought it was a colorful and well-written article that while anecdotal (plural != data!) effectively conveyed the conclusions this author, who is putatively an expert in the field.

If there's a reason to tell me the color of her shoes, I'd love to hear about the color of her shoes. I don't want to hear about the color of everything in the room, though.

I was happy to pay 1% fees on check cashing for that; with low income that was quite reasonable.

Direct deposit had no fee, and this was a great deal for me.

Wonder if any banks will see this as a proper wake up call...

http://mobile.reuters.com/article/idUSBRE97S0O520130829?irpc... "U.S. bank industry profits hit record $42.2 billion in second quarter"

Doesn't sound like an industry desperate to squeeze more pennies from paupers. They have much better ways to do that than urban branch banking.

For years whenever people complained about banks I always said "ING Direct isn't like that". So far CapitalOne hasn't wronged us yet. I suspect it's because they just bought out the business and the same ING Direct people are still running it, and the CapitalOne people know to leave well enough alone.

I'm much like the author. I bank electronically. I actually just visited a physical branch today for the first time in months because I had a big wad of cash to deposit, and mobile phone deposit technology hasn't quite reached the level of sophistication needed to handle cash yet.

My relationship with my bank is generally simple. They store my money, and occasionally pay it out or receive more. This is almost all automatic. The one thing they do that might actually involve some effort is the bill pay service, where they will actually mail a physical check in some cases. But most of the payees I have set up in their system have electronic arrangements.

When I need further service, they're good about it. They answer their phones quickly, they can overnight a cashier's check for a reasonable fee on the rare occasions I need something like that, and they'll call me if something looks like fraudulent activity. But this comes up once a year or less.

For the most part, they're basically another appliance for me. We have defined roles and we stick to them. I keep a generous pad of extra cash in the account, never overdraw, never need anything weird, and in exchange, they charge me no fees, even pay me (extremely nominal) interest, and don't hassle me.

This works great if you have the responsibility and cash to do it, but it would fall apart if I didn't. If I started cashing bad checks and overdrafting, I'd get hit with fees up the wazoo and I'd pretty much have to leave. Features that are an extreme convenience to me now, like totally automatic bill pay, would become a huge liability.

I looked at these places and thought that they offered less service. They don't even keep your money for you, after all! And they charge you for the privilege! But, to their customers, they offer more service. They offer more control over their customers' money. They offer more flexibility and less punishment when bending or breaking the rules.

It's a good lesson in not just assuming people are dumb or ignorant. Sure, a lot of people are, but when behavior is this common, there's usually a good, rational reason behind it.

I always thought that if I was poor, I'd still be "smart enough" to bank properly with whatever money I had. Now, I wonder if that really would be "smart".

I also wonder about financial regulation. I generally favor a "better safe than sorry" approach there, but this might illustrate a downside of that. We've all heard about the trouble that non-traditional companies have had with such regulations, whether it's companies like Paypal, or Simple, or Bitcoin-related businesses. They try to get around the regulations in various ways. Here, RiteCheck is getting around banking regulations by simply not being a bank. I have to wonder if they could offer better service and some of the sort of safety and savings ability we associate with normal banking if it were less difficult for RiteCheck to offer something like an actual bank account.

Bank on SF also has a small dollar loan program called Payday Plus SF. Their partners offer payday loans at reasonable rates (max 18% APR). http://paydayplussf.org/

I know they don't address a lot of the issues the article brought up, but they could be useful for people in certain situations.

Poor people don't use banks because you don't need a bank when you live check-to-check. One doesn't need to make a deposit when the check they just got doesn't cover their expenses from last month. So her concluding statement of "the banking industry needs to develop different fee and service structures designed to accommodate lower income depositors "makes no sense.

It's not a choice, it's not like people are like "Hmm, well I could deposit my money and make 0.5% back next month", it's more like "shit, I'm behind on my gas bill and can't have my family freezing again this winter."

The fact that the teller at the check cashing place is like "family" and they speak spanish isn't really a reason why the poors go there, it's because they don't have a choice.

As an former academic who made it out of the poverty system with some serious work and lots of scars to prove it, this article really pisses me off. Not only due to it's lack of perspective, but due to it's lack of due diligence to actually answer the question they claim to answer in the title.

Just basics: account where 'overdraft' is not possible (account can not go into minus). Debit with low (5%) interest can be arranged separately .

My bank had mobile banking in 1999 (simtoolkit & SMS). In 2002 mobile banking become free!

Credit card fraud? How about white-listing expected transactions over the internet? How about setting up your own filters?

1) I can ask for an overdraft limit of up to $2000, which if I draw into I pay a $3 monthly fee for. 2) I have a credit card which I can easily ask for a limit up to $5000 if I ever need that sort of temporary cash (I don't.) 3) Everything is done with banking cards here - balances update automatically, only credit cards have weird lags with responding to transactions.

Recently I dropped my OD limit to $200 to try and improve my financial hygiene. I didn't watch my transactions and a small weekly automatic payment pushed me past my arranged limit. Talked to the bank and they explained in that case I would pay one $15 fee per month for any number of unarranged ODs. Seems pretty lenient compared to the American situation... but they never charged me the fee anyway!

Out here, banking works like a charm. At least, most of the nationalized banks. Nobody pays the banks anything, and they get a little interest on savings/deposits accounts. OD is not outrageously charged. Internet banking and ATMs are very friendly and totally inexpensive. Almost everyone has easy access to banks; with co-op banks and urban banks offering accounts with minimum limits of 500 INR (~9 USD), everyone can make use of banking institutions. Only those people with lots of black money would want to keep much of their stash away from banks to avoid tax authorities.

I am happy that at least our folks got basic stuff like banking right.

Because there isn't a lot going on in the area, a deposit/commercial bank isn't interested in the area and in turn, business people in the area do not have as many local sources of capital.

In place that need it, entrepreneurship would lead to a rise in saving.

The check cashers don't offer deposit accounts because they couldn't possibly invest their received funds well enough to pay interest after covering the overheads of managing many tiny retail bank accounts with constant withdrawal demands, and their customers are far happier paying a fat commission to get cash than now than a bank account fee to get it later.

Can I simply lend money on my own? setup my own site. People request for loan and I choose whom to lend money to. Kinda micro financing. How easy it is to do that?

I want to do something like $1000 @ a flat 5-10% p.a

What are the risks? Is defaulting a big issue?

http://www.walmart.com/cp/Bluebird/1099170

That's easy to do if you're not poor. It's a problem you've never encountered, so don't pretend your virtue protects you.

Obviously 'punishing' those with no money does nothing. It certainly doesn't prevent overdrafts. The only sane response to this (correctly identified) cycle of poverty: "inability to plan is probably why they're poor in the first place..." is education and help.

Your attitude is the pinnacle of intellectual void and laziness.

I didn't always have money. My father is a carpenter, and I definitely took the time to write down every expense back when there was serious risk I might overdraft.

However, I must apologize for phrasing my original comment too harshly. People don't deserve poverty, but what I meant was that they're at least partially responsible for their situation.

As you rightfully point out, punishment certainly isn't the answer. (I certainly don't see overdraft fees as a sane punishment.)

But payday lenders and the like aren't the solution either. The solution is helping everyone to get the necessary planning skills for the modern world through education. It'd be great and truly refreshing to see a bank which tried to do that (obviously they'd have to find a different business model than the usual).

So, help people to learn to plan. Don't excuse not planning and the institutions (check-cashers, etc.) which enable it.

Almost as amazing as how blind we the privileged can be to the myriad advantages we enjoy.