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People of color pay more than twice the amount in bank charges than white Americans, according to a Bankrate survey.
When asked about fees such as ATMs, overdrafts, and routine service charges, black adults report spending an average of $ 12 a month checking bills at banks or credit unions and Hispanics paying an average of $ 14 a month. According to the survey, conducted by YouGov, white account holders said they pay an average of $ 5 a month. It surveyed 2,743 American adults, 2,339 of whom checked account holders, from December 7-10, 2020.
Whites were also more likely to have free accounts, with 79% replying that they didn’t pay any fees. In comparison, 56% of blacks and 50% of Hispanics had no monthly fees.
Americans who saw their income negatively impacted by the coronavirus pandemic also reported paying more in fees than those who were not financially affected by the crisis. Those who suffered a setback had a monthly average of $ 11 in fees, compared to less than $ 3 a month for those who didn’t suffer from it, the survey found.
“Inequalities in wealth and income have increased significantly over this period,” said Mark Hamrick, senior economic analyst at Bankrate.
“More than any other downturn we are aware of in our history, this is truly a reflection of an economy and a no economy.”
When it comes to fees for routine services, many banks require a minimum balance to avoid the fees. On average, customers must have about $ 594 in their account to waive the fee, according to an October 2020 study by Bankrate.
The availability of ATMs is also important. If you use one outside of your bank’s network, you will get a fee from the ATM owner and a fee from your bank. The fees cost non-customers an average of $ 3.08, and your bank charges you an average of $ 1.56 for using someone else’s ATM, Bankrate found.
Those who are overdrawn on their account face an average fee of $ 33.47.
For minority communities, differences in bank charges are indicative of the inequality they have faced for years, said John Holdsclaw IV, chairman of the Coalition of Community Development Financial Institutions. CDFIs are credit unions, banks, micro-credit funds or venture capitalists that provide low-income communities with access to financial services.
The wealth gap is abundantly clear, as shown in the Federal Reserve’s 2019 Survey of Consumer Finances, published in September 2020. Average net worth for a white family was $ 188,200, compared to $ 24,100 for black families and $ 36,100 for Spanish families.
The additional bank charges “make the problem worse and take a greater toll on Black and Brown and minority families across the country,” Holdsclaw said.
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He believes that in many situations, the higher bank charges could be geographically focused on areas with higher black, brown, and moderate income communities.
“It just makes for a perfect storm,” Holdsclaw said.
“The perfect storm is sweeping the backs of these minority communities and minority families who have their accounts with these financial institutions.”
How to lower your costs
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It pays to shop around to cut your costs, Hamrick said.
Don’t just look at traditional banks, but also credit unions and online institutions. Digital technology offers possibilities that go beyond being physically close by.
“Looking around for the best banking services may not apply the same level of excitement as, say, buying a new outfit, electronic device, or car,” he said. “But if you don’t, it could make the difference between achieving our financial goals or not.”
Some banks offer accounts with no monthly fees and no minimum balance. CNBC Select named Capital One 360 Checking Account the best no-cost general checking account, with Ally Interest Checking Account second.
The best way to avoid ATM fees is to use one on your bank’s network. According to Bankrate, credit unions and smaller banks tend to have free networks of more ATMs available to customers. Online banks may also have national networks that can increase the number of ATMs available to you at no cost. Some also offer a refund for the costs of out-of-network providers.
If you still can’t find an ATM, consider getting a cash back when you use your debit card to make a purchase.
CDFIs are a great option for minority communities, Holdsclaw said. There are more than 1,100 across the country, with a total of $ 211 billion in assets. Some are banks and others are credit unions.
While fees will vary from institution to institution, they generally will not be high, he said.
“It’s built into the missions of these financial institutions that they are not going to charge huge fees from people who are already in a low or middle income community,” Holdsclaw said.
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