Imagine you just got off the bus coming back from an 8-hour shift at the supermarket that just opened up in the wealthier neighborhood across town. You used to work at the local diner, but you traded in the short commute for a more stable income. The grocery store pays $11/hour, better than what you got at the diner but still below the minimum income that is considered livable in your state. Famished after a long day on your feet, you book it to the fridge only to realize that you forgot to buy groceries that week. Thankfully, tomorrow is your day off which gives you time to take the 25-minutes bus ride to the local Shop & Stop. Tonight, though, it’s going to be fast food. Not your first choice, but it’s your only convenient and inexpensive option.

Across America, businesses exist that are designed to profit off of the poor and vulnerable.

The next day, you trek across town to the Stop & Shop. You only have enough to buy the essentials: milk, eggs, granola bars, etc. Since your SNAP benefits, which used to subsidize your grocery trips, got cut last month due to your newly increased income, you end up paying over $100 out of pocket, much more than you budgeted for that week. With only a single income and four mouths to feed, grocery shopping often feels like a daunting task. Now with less than $1,500 in your checking account, your bank charges you a $10 low-balance maintenance fee. It’s not much, but it makes you wonder why you bother with the account in the first place.

You’re in the middle of your shift on Wednesday when you get a call from the school. Your son fell on the playground and chipped his tooth. After waiting for your shift to end, you rush your son to the nearest dentist’s office. $400 later, your son’s tooth is fixed, but rent is $1,100. How are you going to make that cash back by the end of the month?

Even though you decided to pick up more shifts at the grocery store, with the extra cost of a sitter, you don’t make enough money to cover $1,100 worth of rent, plus utilities, plus phone bills. Your take-home pay that week would have been enough to cover your bills, but the month ends on Thursday, and you get paid on Friday. To avoid a $35 overdraft fee on your checking account, you decide to check out the payday loan company* in your neighborhood. You know it’s bad, you know interest is high, but it’s the only option you’ve got at the moment. You decide to take out a $300 loan from the payday loan company. It’s not much, but it’ll cover rent and utilities. After paying rent and picking up even more shifts at the grocery store, you finally make enough money back to repay the loan. Even with the advertised “low interest rate,” you still end up paying back almost double what you borrowed, even though it’s only been 14 days. The extra $300 is a blow to your bank account, but if you keep picking up shifts to avoid any extra costs, you believe that you can make it out with just enough to pay rent next month.

A simple $300 loan could turn into a $1500+ expense in a matter of weeks.

Go to the doctor or buy groceries? Pick up more shifts or pay for daycare? Pay overdraft fees or get a payday loan? These are the decisions that millions of overworked and underpaid Americans face every day. Across America, businesses exist that are designed to profit off of the poor and vulnerable. The first and most costly inequity facing impoverished Americans are predatory financial service providers. Large banks such as Bank of America, TD Bank, and the like make their money by charging interest on bank accounts. The more money someone has in their bank account, the more money the bank makes. This practice becomes unprofitable, though, when a customer’s account balance becomes too low. Lenders prey on the unbanked and underbanked by exploiting desperation and charging exorbitant interest rates. 

According to the Center for Responsible Lending, Missouri’s average payday loan interest rate is 527%. That means that a simple $300 loan could turn into a $1,500+ expense in a matter of weeks. This grim situation is only compounded by the fact that, according to a 2018 Federal Reserve survey, 40% of US households could not afford a $400 expense without neglecting other bills, selling something, or borrowing money. Whether it is by making predatory banking practices illegal, increasing social welfare benefits, increasing the availability of  affordable housing, or raising the minimum wage, the U.S. government must step in to provide a greater amount of aid to citizens struggling with poverty. It’s time that American law and policymakers pay closer attention to the dire situations that millions of impoverished Americans face on a day-to-day basis.