In the U.S., the poorest people spend an average of more than three times as much as the wealthiest ones to get access to cash – specifically, about $0.81 a month for those earning under $21,000 annually, compared with $0.25 for those earning more than $100,000, according to the study, published by the Institute for Business in the Global Context at Tufts University.
What’s more, low-income people tend to spend far more time getting cash – time that might have otherwise been spent earning money, running errands, or relaxing. On average, Americans spend twenty-eight minutes a month travelling to get cash. People who don’t use a bank spend five minutes longer getting to the place where they can get cash, and unemployed people spent nearly nine minutes more, not including time spent standing in line.
“The truth is every payment instrument adds a disproportionate cost onto the poor,” said Bhaskar Chakravorti, senior associate dean for international business and finance at Tufts’ Fletcher School and co-author of the study. “Yet cash we tend to think of as the poor man’s best friend. That is where we’re wrong.”
Wealthier people and lower-income people tend to get access to cash differently. Wealthier people are more likely to have bank accounts, which means that they can visit an A.T.M. run by their bank without paying a fee; the same goes for cashing checks. Lower-income people use check-cashing services, which add high fees. Plus, employers have started compensating low-paid, hourly workers with prepaid cards that come with huge fees.
All this matters because it adds up to another way in which lower-income people are at a disadvantage when they can’t, or don’t, access the basic financial services that many wealthier people take for granted. A secure and low-cost way to store and retrieve your money remains one of the most essential tools for clawing your way to financial security, and yet rich people are far more likely than the poor to have bank accounts. Low-income Americans don’t just need to make more money; they also need a better way to reach the cash they’ve earned.
Via The New Yorker.