It’s no surprise that low income families are unbanked or underbanked. The most basic feature of a typical banking arrangement, a checking account, is getting more expensive. The research center within MoneyRates, a sister site to Consumerism Commentary, released its mid-year survey of checking account fees and found that in every major area measured, fees have increased over the past six months.
The survey uses data from the 50 largest banks in the United States as well as from a similar number of small banks, thus it isn’t comprehensive, but it may be representative of the industry as a whole. More than the survey results at any one time, the changes from one survey to the next six months later can accurately describe the banking environment for consumers.
Monthly service fees, among accounts that charge these, now amount to almost $145 each year on average. That puts these accounts out of reach for families living paycheck to paycheck if they do not supplement their everyday spending with the use of a credit card, going deeper into debt each month.
A household could make some sacrifices in other expenses in order to afford a checking account, but they shouldn’t have to. Although it’s increasingly rare to be able to find a free checking account, according to the survey, slightly more than 35 percent of checking accounts do not carry monthly checking accounts.
You’re more likely to find these free accounts by ignoring the big, national banks in favor of local community banks and credit unions. These smaller banks don’t benefit from the type of advertising dollars available to large national banks offering expensive products, so it’s less likely to hear about these banks.
If you’re unable to find a free checking account and must settle for one with monthly maintenance fees, you can still avoid the fees in many cases by carrying a large enough balance. That minimum balance required to waive the monthly fees has also increased over the last six months. You’ll need a balance of almost $4,500 now to avoid the fee, up from more than $3,500 last year. That’s a significant increase that again makes money management more expensive for those who don’t have money saved.
Unless you have several hundred dollars saved in the first place, you won’t even be able to open an account (on average). Te average minimum balance for opening a new account is $408.76, up from $391.41. The good news is that if you do not have this minimum requirement, you will be forced to find banks with better terms if you’re not discouraged from opening an account in the first place.
The best way to avoid these increasing fees is to shop around, as mentioned in the MoneyRates article. Not every bank makes checking accounts this difficult. You have a better chance of finding a fee-free experience at a smaller bank or credit union.
Many online banks also offer free checking, and if you are a student, you have a better chance of finding free accounts even at large financial institutions. Unless you plan on perpetual enrollment in a university, however, you won’t be a student forever and will need to look for other options.
Shopping around is not always an option for lower income families. There may be only one bank branch convenient without reliable transportation, and you can be sure that if a bank believes its customers have few alternatives, it will take advantage of its customers in as many ways possible.
The internet, however, makes choices possible, even for low-income families. Even if computers owned by the poor are a few technological generations behind, and even if low-income families go into debt to afford their internet service, online access is available to more families every year regardless of income. Shopping around online for better banking options can make free checking easier to reach.
Unfortunately, mainstream banking has an image problem within low socio-economic status communities, leading to more underbanked and unbanked households. Until families trust giving their money to a corporation or credit union, choosing instead to use check-cashing outfits and payday loan operations, both much more expensive than mainstream banks but available to customers without savings or without the requirement to turn over money to a company, they won’t be able to benefit from some of the better, less expensive checking account options, even at community banks and credit unions.
Updated October 20, 2016 and originally published August 14, 2012.