Enforced Bank Accounts

[urbeatle]

Sacramento's mayor wants to pass an initiative to help poor people get bank accounts. It's apparently part of a state-wide push.

By opening checking or savings accounts, the mayor said, residents can save hundreds of dollars they might be spending by cashing checks at payday loan centers

Comments

[vampyrecat]

Banks suck. Banks are for suckers. Credit Unions usually don't have those fee structures and the minimum balance is usually very low. I don't know why people insist on giving their money to banks.

[bemused_leftist]

I have accounts at three different banks (long story). None of them charges fees (except maybe for blank checkpads). None of them require a minimum balance.

Two of them are local, not the big national banks that fail.

Might be a good idea to shop around.

Some of them may have required an opening deposit of $100 but it didn't have to stay there any length of time.

[urbeatle]

Right, but how hard are they going to press for local banks versus national banks?

I checked Kevin Johnson's blog and there are some details there, not included in the Bee article, which make the initiative sound less troubling: credit unions are an option, and they are talking about special no-minimum balance accounts. I'm still bothered by the idea of the government helping banks get customers, but not as much, although I'm waiting to see how the accounts are maintained. Can the banks change the rules at some point?

There's also this quote: "Financial institutions include Bank of America, Bank of the West, BBVA Compass, Chase Bank, Citibank, Patelco Credit Union, SAFE Credit Union, Schools Financial Credit Union, Travis Credit Union, Union Bank, Wells Fargo." A couple credit unions in there, but it's certainly looking like a pro-national banking initiative, isn't it?

[doctroid]

My initial reaction was hostile. Now I'm not so sure, partly because of your comment here, and partly because your title "enforced bank accounts" seems unfair -- I thought they were talking about MANDATING bank accounts.

Still: there are good banks and bad banks (mostly local and big, respectively), and there are credit unions, mostly good. Between the good banks and good credit unions, it seems to me most if not all the features of the "starter accounts" are likely to be already available.

So it seems like the main outcome of this would be to steer more people toward bad banks. And I can just see the poor people going into a Chase bank to open a "Bank on Sacramento" account and coming out with a car loan or a mortgage they can't afford.

[noisepimp]

I used to teach classes about how to do just this. There are several nonprofits that do (or did, they may have folded) just this sort of thing, even for people with bad credit records.

Check-cashing places are a huge ripoff. They're just another type of poverty pimp. Using them instead of banks is just giving a chunk of your income to a small sleazy company instead of a big sleazy company, and even if you end up with a bank that charges a service charge it's probably a lot less than what the check-cashing place charges.

As to those with illegal sources of income, well, drug dealers don't take checks.

[sunburn]

I don't have a problem with advocating banking versus check-cashing ripoff joints-- you're right, banking and economy are not for everyone, but there are plenty of people who can and will be responsible savers who can't or haven't cleared the hurdles.

Banks are not all great, but the fact is that they can be community-based and can work with someone like the mayor to create no-fee accounts to provide low-hurdle bank access. Banks can afford to have loss-leaders like these, while check-cashing places won't because it's antithetical to their predatory business.

One thing that disturbs me is that people don't seem to be aware that banks will honor checks drawn on their own bank, i.e. if your employer pays you a check drawn on BoA, you should be able to cash it without charge at a BoA branch. Then again, lots of payroll checks are drawn on nebulous pseudo-financial institutions like ADP, which makes it basically impossible, rather than merely difficult to access a free cashing service.

[majorzed]

I hate to point this out (well, that's a lie) but by considering that people who don't have bank accounts might actually have good reasons for it, you are displaying a dangerously libertarian strain of thinking.

I recall hearing from an economist about a survey aimed at figuring out the time value of money to poor people. A bunch were asked if they would prefer $100 today or $105, $110, etc. two months from now. Many said they would rather have the $100 two months from now. Huh? Reasons included needing it two months hence and the presence of other household members who would spend it if they got their hands on it before then.

I know, this suggests they would want a bank account, but that's not my point. The point is, don't assume you know what's best for someone else without at least discussing it with them first!