Why It’s More Expensive To Be Poor

Most people are not super wealthy, but we all have
an idea what it might be like to be a wealthy person. We watch them on TV, we follow them
on Instagram, we read their blogs and autobiographies. Unfortunately, that awareness of how the other
half lives doesn’t happen much in the other direction. Though many of us have probably
described ourselves as “broke” or “poor” at one point or another, very few have an
understanding of what real poverty feels like. And it’s not just a matter of having less
money. Once you get below a certain threshold, a whole new set of rules apply that actually
make day-to-day life more expensive. If you’ve never struggled with real poverty, you might
not be aware of the many hidden costs and financial traps that conspire to keep poor
people poor. It’s very hard to make your way through
modern life without access to basic financial services like checking accounts, ATMs and
personal checks. But the less money you have, the more these things will cost you. That’s
because banks make their profits by accruing interest on your money. So if your account
balance is too low, usually under $1,500, they won’t consider you a profitable client
anymore, and they’ll make you pay for their basic services in the form of a monthly fee. And heaven help you if you go below zero–each
overdraft incurs a charge of about $35, and many banks will deliberately reorder your
transactions for the day–from biggest to smallest–to drive you into the red more quickly
and rack up as many overdraft fees as possible. If a bank is willing to extend you credit
at all, the terms will be much less favorable than for someone with a rosier financial history.
You’ll pay more money in interest every month, and any late payments means more penalties
and fees. Even cash can be more expensive if you don’t
have much of it. If you withdraw $100 from an out-of-network ATM, that $3 fee equates
to a 3% service charge. But if you can only afford to take out 20 bucks at a time, you’re
essentially paying a 15% charge to access your own money. Taken together, this means that a poor person
might end up paying hundreds or thousands of dollars a year for services that wealthier
people virtually enjoy for free. It’s no wonder, then, that a lot of low-income people
avoid banks altogether–but even that comes at a steep price. Cashing a paycheck without
a bank account costs money. Buying a money order to pay your electric bill costs money.
And if that bill is due in just a couple days? Well, you can either get hit with a late fee,
or fedex it–an extra expense that someone with a debit card and an internet connection
never has to worry about. If you think that dealing with credit card
debt is bad, thank your lucky stars you’ve never dealt with a payday or car title lender.
These businesses are often the only recourse for people without credit cards, and their
interest rates reach upwards of 800% annually! Not only does it cost more to borrow and spend
money, but what you spend it on is often more expensive! If you have to feed a family on
a tight budget, buying in bulk at a supermarket is usually the best option–but one not available
to many poor people. Even if they had the cash on hand to buy weeks’ worth of food
in one trip, how is someone who depends on public transportation supposed to get it home?
On their lap on the bus? Big food retailers–ones with enough purchasing
power to offer low prices–are notorious for avoiding poor neighborhoods, and people who
live in these so-called “food deserts” often lack the mobility to cruise around town
bargain-hunting. Instead, they’re stuck with local convenience and corner stores,
where prices are much higher. Or they rely on fast food, which can seem cheap in comparison,
but is actually more expensive than cooking at home, to say nothing of the long-term health
risks. Rent can also be more expensive. Most landlords
require a security deposit between $500 and $1000 to move in–an impossible sum for people
barely scraping by. In that case, your only option (other than homelessness) might be
a low-end extended stay motel, which typically don’t require deposits, but cost way more
than an apartment in the long run. And they often lack amenities like kitchen appliances
and laundry that save apartment-dwellers time and money. They say “time is money,” and the less
money you have, the more time you have to spend on everyday tasks. Waiting at the bus
stop, waiting at the laundromat, waiting at overcrowded clinics and public offices. This
leaves much less free time to take care of one’s family, pick up extra work, or strategize
a way out of poverty. It gets worse. Inflation, the general increase
in prices, tends to hit things like food, gas, and rent the hardest. The lower your
income, the greater percentage of it goes to those costs, so a poor person will see
their year-over-year expenses go up at a higher rate than a wealthy person. All these pressures take a toll on one’s
psyche that only makes things worse. Imagine having to constantly make tough decisions
about where to spend your last few dollars: Pay the water bill or buy food for dinner?
Put gas in the car or see the doctor? This relentless burning of mental energy leads
to a deterioration in the quality of one’s judgement–a phenomenon psychologists call
“decision fatigue.” It’s why someone might visit a payday lender when they know
it’s a bad idea–they’re so exhausted that they’ll settle for a quick fix even
if it will lead to more problems down the road. Closely related to decision fatigue is the
“scarcity trap,” which is our tendency to fixate on the resources that we have the
least of, to the point that we lose sight of the big picture. Running low on diapers,
for instance, can create a feeling of panic that compels a poor mother to buy 6 months
worth of Huggies–only to realize afterwards that she didn’t set aside enough money for
rent. Some might think that poor people just need
to work harder and spend smarter. And while it’s true that improving your financial
situation requires these things, it also requires having at least a little bit of extra cash
to move around, and access to decent spending options. If you can’t choose where you shop, where
you live, or where you bank, you become a captive customer to predatory businesses.
If you don’t have any extra money to save, invest, or budget, you can’t make a financial
plan. And when are you supposed to think about tomorrow when you’re constantly putting
out today’s fires? Next time you describe yourself as “broke,”
remember that having just a little bit of wiggle-room is infinitely better than none
at all. It can make all the difference if you’re trying to improve your financial
situation. So if you do have that wiggle-room, be thankful
and don’t waste it! And that’s our two cents! Missing one payment can quickly spiral into a pit of debt. Has this ever happened to you and were you able to escape it? Share your story in the comments.

100 thoughts on “Why It’s More Expensive To Be Poor”

  1. Why anyone would join a bank that charges fees like that is beyond me. Ever heard of a credit union? Also, you don't have to pay ATM fees if you just withdraw from your bank/credit union directly. There are usually multiple locations. Most of these situations stem from plain stupidity and laziness. I've been dirt poor so I know. (Edit) I will add that it seems better education is needed in basic finances while still in K-12. Unfortunately, this video didn't provide any solutions at all.

  2. Matthew 25 29: 'For to everyone who has, more will be given, and he will have abundance; but from him who does not have, even what he has will be taken away.'

  3. We need to confiscate the money from the middle class and give it to the government. That will solve everything. Then we can all get in line for our loaf of bread for the week.

  4. I wish you guys had more funds at PBS so your programming could reach a wider audience. I bet most people who this video is intended for never even seen it.

  5. I wish someone had told me this before I came up with the actual concepts behind the Mall Of America back in (1988)of which was only 1 of 75 various types of business endeavors that ultimately made $300 billion dollars for my wife's side of the family, and actually left nothing financially for me all of these many years now and I must admit that you look good in the shirt that I myself actually came up with as well in 2012-"But that's another story of far too many thing's that I've created for society in commodity's,but I'm always around."

  6. Your words really hit home on this one. I felt like the two of you were in my living room. I'm writing Money Mart a cheque right now xP

  7. Get a savings account instead of a checking account first. The minimum balance requirements and monthly fees are both lower. And smaller, regional or local banks (or credit unions) are always cheaper than the big national banks.

  8. In the early 2000s I had a credit card company fraudulently charge late fees. As a result of a new law, all my other credit cards could charge higher interest rates as well as Auto insurance for years to come. There was a class action settlement but nowhere near compensated for the damaged.

  9. The ATM joke got me, guys really. someone didn't learn math well. So…
    100 * 3% = 3 usd
    20 * 5 * 3 % = not 15% , gosh it will be
    20 * 3% = 0.6
    20 * 3% = 0.6

    20 * 3% = 0.6

    20 * 3% = 0.6

    20 * 3% = 0.6

    total 0.6 *5 = 3 usd.

  10. How do you guys bare to live in such an horrible and unfair country?! I really don’t get it… Here in Europe most of this doesn’t exist. But it still sucks to be poor!

  11. How can they sound so cheery about this? Instead of closing on a “Be thankful you’re not in THAT position,” maybe give some advice on what we can all do to change it! Obviously, capitalism with no moral restraint is not a good idea. This is what regulation is for, but certain folks have turned that into a bad word because they can’t be as greedy and get away with it. If the situation is hopeless, say so. If we can help, why not at least end by giving some examples of where regulation helped it from being worse, and let the viewer connect the dots.

  12. This video is spot on…I grew up like this and lived like this for more than half of my life…While I am not wealthy now, I am not in that same boat anymore…I feel poor sometimes because I have made some silly decisions with money and I am working towards getting out of debt, but I cannot compare my current situation to my previous situation…I cringe a little inside everytime I hear someone say they are broke or poor when they clearly are not…They are not living like this video describes…I remember being poor, and the term is used too loosely…Great video!

  13. WOW!! I actually am broke ? people think I’m being rude when I don’t lend them money that they’ll never pay back. My money has a destination way before I even get it and it’s not your pockets sorry but I’m not trying to be homeless because you want to eat 6 meals a day ??‍♂️

  14. I can't like this video. Far too much foggy thinking from what it looks like failure to grasp simple economy from people that are here to teach it… To pick a single example that pushed me to dislike this video for the second time:

    @ 6:11 if you think business are predatory, start your own one. Don't just complain. If you think people who have proven themselves that they can't be trusted with money, should be trusted with money: trust them with your money. Don't complain no one else will trust them with their money._

    I live in Serbia. My country has poor bank rating so it's more expensive for me to take out a loan. Why? Because my countrymen mostly suck at managing money. It's not that banks hate Serbs, but that they have proven themselves poor enough with money that they warrant a higher fee for the perceived risk. They are deemed a risky investment. Would you loan a Serb some money at the same rate as you would a Brit, for example? If the answer is yes, it's no wonder you don't have any money to lend.

    This prejudice has nothing to do with social class, gender, skin color or ethnicity. It has everything to do with simple economy. This is why you first have to prove yourself to be smart with money via credit score, before banks will be happy to lend you money at lower rates and give you perks to attract you so that you will chose them as your business partner.

    And another thing annoys me- poverty line in US is 24k $, while I earn about 12k here and am well off, while almost everything except rent is cheaper in US, often significant so, because your government doesn't try to "help" you with well meaning, but ultimately harmful regulations… And you call 24k/ year poverty, while calling the very businesses that allow your people to escape poverty predatory…

  15. I tell my kids to plan accordingly. Their most important life decisions will have to be made while they're still young and inexperienced. Those decisions will shape their lives.

  16. With the ATM withdrawal, it's more like $6 per withdrawal. The $3 is incurred when you withdrawal from an out of network ATM, which resorts to a $3 fee from the ATM's bank, and another $3 fee (usually) from your own bank, which usually comes out to around $4-6 total. So, it's a 6% charge if you take out $100, and a whooping 30% charge if you're only taking out $20.

    I learned this the hard way when I went to a taco place that didn't accept ATM. I used an out of network ATM, and I was charged $3 twice, by the ATM machine, and by my bank. Never again. My current bank wont charge me a fee if I use an out of network ATM, but most banks will.

  17. I grew up in real poverty. I had only one pair of shoes, wore the same pants periodically. We even saved water from the laundry and shower to use to flush our toilets. I relied on school free lunches for sustenance. Fortunately it seems like the government programs support below poverty level so my college tuition was absolutely free. My mom never bought any of her clothes (her uniform was basically her attire most days), only traveled once or twice in her entire life, and worked hard to support her entire family to get where we are at today. I am extremely grateful for what my mom sacrificed to provide for us, especially to this day because I have chronic health issues which gets costly.

    I still wear repeated clothing. Yeah some people ask why I wear the same clothes almost everyday. Poke fun at me. But i am just grateful that I am alive. When you have chronic health issues, and you grew up in poverty, it doesn’t take much to make you happy.

  18. The fundamental flaw, which completely undermines the video, are common psychological and sociological errors of over-generalization and/or over-specification.

    The video must be taken to apply only to such a small portion of the population as to be meaningless to the vast majority of the population.
    The video must be taken to apply to everyone within the “poor” population and be unusable to specific situations.

    The video makes no qualified or quantified statements on who is “poor” or “broke” or in poverty; allowing the generalities or specifics to be unusable because basic terms are not established.

    At no point is ANY specifics on population or demographics given: who, what, when, where, why, how, or how much.

    Individual examples can be given to support or undermine the information given in the video. However, because the flaws of over-generalization/specification are the premise, any contrary evidence can be casually waved off as inapplicable.

  19. Thumbs down.

    In the end, the video is only useful for trivial information because it provides no specific, actionable plan to remedy poverty.

  20. They don't teach either civics or home economics in schools anymore. I'm guessing they are teaching for standardized tests that show you are learning as a substitute. Every college and university has three or four stands where credit cards are being given away like Halloween candy. There's something really wrong here.

  21. It’s better being poor than living in debts. Because those who are in debts are actually poor. The truth is don’t have don’t buy.

  22. Do people in the US have social security? You shouldn't have to worry about health or education whether you're poor or rich.

  23. Kinda funny that you used the most expensive/richest district of Vienna for your poor neighbourhood on the supermarket map 😀

  24. Learn how to stealthfully camp in a dependable van and depend heavily on Planet Fitness for showers and entertainment. Haven’t had to do it yet but it’s constantly in the back of my mind. Of course this would suck if you have kids so don’t have ‘em unless you’re ready. And I have informed my friends to just shoot me if I even think about visiting a pay day lender. Many of these things are designed to make you hate and despise being poor. They’re designed to make you wanna work harder to get out of these situations. If you’re poor it’s probably your own damned fault.

  25. Much appreciated. This channel has advice for the real world. Not like that given by those real estate “gurus” making you feel like a lazy loser if you don’t invest in their “gold-mine opportunity”. Also, it helps to pray to remain hopeful but don’t let anyone tell you that you must give them your last penny so that God can send you a windfall. Unfortunately, some churches are into the predatory business as well. If you pray, do it as in Matthew 6:6.

    Planning, budgeting, and remaining faithful works. I can attest.

  26. Yeah this video is pretty outdated. I mean look at the marvels of PRIVATE businesses that we have today! They help many of those problems. Also, as a poor person, you get hit with these higher interests because you’re a more risky client! In other words the power is all in you to NEVER have a late payment BECOME financially literate, AND keep looking for better opportunities! NEVER settle at a dead end job! That’s the problem with people, they quit! And every time we vote Democrat, we can expect MORE AND MORE POOR PEOPLE ON THE STREETS!

  27. I've been poorer than anyone that you described in this, it lasted a couple months. If you're poor for a long time it's because you're stupid.

  28. A few months ago, I made less than $500 in a month and was therefore charged a $12 fee by Chase Bank. That might not sound like much, but I spend little money unnecessarily, so it hurt. I sent them a polite but probably desperate-sounding plea to kindly refund me my $12, and of COURSE they didn't respond. Not to sound dramatic, but I'm being gently crushed by student debt. Thanks for kicking me while I'm down, Chase!

  29. My thing that’s saved me a lot of money is don’t buy bottled water, invest in a good insulated water bottle that will last a long time and refill it. I’ve literally saved thousands, and any store will have a water fountain to fill it up at that’s filtered water. Depending on where you live, there might be water fountains in the park. And also stop eating out and stop buying coffee everyday, it’s a waste of money you can literally make coffee for like 2 cents at home by buying beans in bulk then spending $2 on coffee, same thing with breakfast so much cheaper to get up a little earlier make breakfast and lunch for the day instead of buying it.
    I’m still poor but I don’t feel like there’s a reason to be buying bottled water, coffee or eating out on a regular basis.
    And stop using excuses for everything, the water bottle you can remember to bring with you, you remember your wallet, phone and keys everyday you can remember a water bottle as well. I get it’s annoying to carry around but you’ll get used to it.
    People need to stop making excuses for every little thing, if you want changes you have to change your habits.

  30. “$500 to $1,000 security deposit” lol I hate to be that guy but in NY they ask for 2 months rent for a 300 square foot which is about $2,200 per month plus the broker fee which is equal to rent and $80 for a background check. That’s over $6000 just to move in to a roach/bed bug infested den.

  31. A friend and I worked at the exact same job making the exact same salary. He was married with no kids and his wife worked too. I was divorced with a kid so I paid child support. Yet for some reason, I climbed out of that financial mess and improved my quality of living. He was always broke, despite being at a financial advantage. We both moved on to other jobs making more and more money. Years later, working at different places but with comparable incomes, I'm in a house with good credit and positive monthly cash flow. He's still broke.

    Sometimes it's the person, not the circumstances.

  32. I appreciate ancient history, but all the time they spent teaching me about it was wasted compared to useful things they should have taught us.

  33. I like how 90% of the comments are about minimum wage and blaming other people for problems. Economically speaking, a person that doesn't make enough money doesn't add as much value to their labor production as someone who does make enough money. If we just gave money to everyone who said they needed it, we wouldn't have much of an economy anymore.

    Also as a side note, people that walk up and down the street with signs are just street performers. They have a salary of $0 and make a hell of a lot of tips. If you're truly homeless, you'd know not to waste calories on walking with a sign and spend it trying to find employment.

  34. Businesses in general are not in ghettos due to theft, vandalism, & crime against patrons or customers.

    I have seen entire sections of cites turn black & in few years everything moves out.

  35. I saw a documentary they gave another example of how being poor is expensive. It was Kyle spent looking for Change and it can be found here on YouTube. They showed a family that struggled financially because two of the members have disabilities. The husband had to quit his job because of his disability. While the wife had to become the main Breadwinner. They would overdraft they are bank account in order to pay the bills, but that ended up becoming too much to deal with because their Bank, as described in this video, wood re-sequence they are transactions so that it would be more likely for them to overdraft multiple times because of high to low processing. So they ended up giving up on their bank account and living a cache that way they would not be able to spend money that they don't have. But it proved to be expensive to get all of their bills paid because they had to go to physical places in order to pay the bills, often having to spend between 25% or 50% of their gas tank. Meaning that they probably have to spend more money on gas in order to make sure that everything is paid. If they had a bank account, they can simply pay their bills over the phone or online and not have to drive from place to place to place to place in order to get all of their bills paid on time.

  36. You guys keep cranking up gems ??. This topic might be considered taboo by some, but you discussed it clearly and with empathy. Good job.

  37. You guys are amazing. It's really uplifting for me to hear people give an incredibly informed presentation on what poverty actually looks like. It's give all of us a lot of perspective and allows us to be more grateful and have more compassion. And maybe even help out and volunteer at places that are actually working to pull people out of poverty by providing opportunities. Thanks a ton!

  38. While there's some truth to all of this, the crux of the problem is that people born into poverty are often not taught how to be financially smart. All of the commentary about banks may be true, but that's why people should be using credit unions instead. The last 3 credit unions I've had accounts at have abolished overdraft fees, have free overdraft protection, and don't charge me to have an account. All of the other institutes mentioned, like convenience stores and predatory loan companies, are quite literally in business because people make poor financial choices. I grew up in Detroit, eventually lived comfortably on less than $20k a year, never had a bad credit score, and avoided all of these things mentioned in the video like the plague. I have friends and family who currently don't make very much money, and I see them constantly falling into these financial pits, simply by being lazy, like buying food from convenience stores all the time, eating out, and buying a flagship phone every year. This video perpetuates a defeatist attitude, which is by far, the largest problem with being poor. Stop complaining, start learning about how to be smart with money, and do something with your life. This video shouldn't be yet another excuse as to why your financial life is in ruins. We all make mistakes, and we can all bounce back.

  39. I grew up pretty dang poor and my husband and I are working out way out of the hole now. We have a while to go, loans to pay off, etc. But I hope within 5 years we’ll be caught up totally and where we wanna be.

  40. Been there. Luckily, now we're doing better. Homeowners. Parents.

    I grew up with a middle class family that suddenly slipped into poverty with the recession. I learned a lot from my parents unfortunate mistakes.

  41. Store STARTED in densely packed cities. And ABANDONED them because they got SHOPLIFTED TO DEATH!! The IDIOT poor people do NOTHING but SCREW themSELVES over!!!!!

  42. Withdraw 200 bucks or however much you need once per month to avoid service fees from atms if you don't have an account that has free checking/zero atm fees etc. AND HUNKER DOWN. THE KILLER IS THE TIME THAT GOES BY WHILE YOU ARE WAITING TO ACCUMULATE ANY KIND OF SAVINGS IF YOU CAN. YOU WANNA SLOW DOWN TIME JUST SAVE MONEY BECAUSE IT EQUALS BASICALLY DOING NOTHING FOR THE MOST PART AND SUCKING IT UP. IT SUCKS BUT IT IS WHAT IT IS.

  43. I'm broke. I am unemployed after graduating from college. I got a job offer in another city but I had no means of renting a room in the new city or coming up with the deposit money for renting an apartment…. So I had to turn down the job and remain unemployed…

  44. Survival of the fittest in action. Don't take payday loans, don't pull money from out of network ATMs, don't spend more money than you have, etc…

  45. This video leaves out the idea you have a choice of where you conduct business. Banks charge a few dollars for a money order, but a market/deli nearby me has a Western Union machine and only charges a quarter. I bank with PNC and in the case of using a different ATM, PNC credits the fee back to my account. When I needed checks, the teller got me free ones because my employer has business accounts with them. Shop around folks, because these places should work for you, not the other way around.

  46. I have been down in the trenches of financial despair so long it became normal to view life as hopeless. It was only when I decided not to that my situation changed. God has taken care of a lot of my worries and I did the other half by being willing to work hard, being patient, and asking for help. Having a good attitude does wonders as well. Just because you are not happy doesn't mean you have to make others sad. Be cheerful and honest and people will go out of their way to lend a helping hand. To be honest, that's about the only way to make it out of the pit of despair we impoverished inhabit. Also, educate yourself. Libraries are free most places. Try to learn something helpful to you daily. And lastly use every opportunity to get to the next goal. Find a job and report daily sign up for any and all over time. Look for room mate housing. I found a great spot on Craigslist for $425 a month. (Blessed) Use any free time you have to continually focus on where you want to be in order to be happy. Write it down and create a plan.

  47. I think I know why poor women are more likely to have kids. Tampons and pads can get quite expensive, especially if you have heavy periods. Since if you get pregnant, you don't have to pay for them, it can seem cheaper in the short run- but in the long run you end up with another mouth to feed and have to spend money on diapers.

  48. Excellent. No ‘let them eat cake’ attitudes here.

    I often hear about govt attempting to regulate predatory payday loan companies, here in Canada.

  49. Use the free version of the Budget Mom’s budgeting workbook. Don’t buy the pretty one, use the free ones and go through her short email course. Really good!

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