In accordance with surveys, blacks and Hispanics pay twice as a lot financial institution charges as whites
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According to a survey by Bankrate, people of color pay more than twice as much bank fees as white Americans.
When asked about fees such as ATMs, overdraft fees, and routine service fees, black adults say they spent an average of $ 12 a month on checking accounts with banks or credit unions, and Hispanics pay an average of $ 14 a month. According to the survey conducted by YouGov, white checking account holders pay an average of $ 5 per month. 2,743 U.S. adults were surveyed from December 7-10, 2020, of whom 2,339 were Account Owners.
Whites were also more likely to have toll-free accounts. 79% replied that they had not paid any fees. By comparison, 56% of blacks and 50% of Hispanics had no monthly fees.
Americans whose incomes were negatively impacted by the coronavirus pandemic said they paid more fees than those who were not financially affected by the crisis. Those who had a setback had a monthly average of $ 11 in fees, compared to less than $ 3 per month for those who were unaffected.
“During that time, wealth and income inequality has worsened,” said Mark Hamrick, senior economic analyst at Bankrate.
“More than any other downturn we’ve known in our history, this has been a reflection of an economy that should and shouldn’t be had.”
When it comes to routine service fees, many banks require a minimum balance to avoid the fee. According to an October 2020 study by Bankrate, customers must have an average of $ 594 in their account to waive the fee.
The availability of ATMs is also important. If you use one outside your bank’s network, you will receive a surcharge from the ATM owner as well as a fee from your bank. The surcharges cost non-customers $ 3.08 on average, and your bank will charge you an average of $ 1.56 for using someone else’s ATM, Bankrate discovered.
There is an average charge of $ 33.47 for those who overdraw their account.
For minority communities, the inequality in banking fees is an indication of the inequality they have faced for years, suggested John Holdsclaw IV, chairman of the board of the Coalition of Community Development Financial Institutions. CDFIs are credit unions, banks, microcredit funds, or venture capitalists that provide low-income communities with access to financial services.
The wealth gap is glaring, according to the US Federal Reserve’s 2019 consumer finance survey published in September 2020. The median net worth of a white family was $ 188,200, compared with $ 24,100 for black families and $ 36,100 for Hispanic families.
The additional bank charges “only make the problem worse and place more burdens on black and brown families and minority groups across the country,” Holdsclaw said.
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He believes that in many situations, the higher bank fees may be geographically targeted to areas with higher black, brown, and low-income communities.
“It just creates a perfect storm,” said Holdsclaw.
“The perfect storm is on the backs of the communities and minority families of these minorities who have their accounts with these financial institutions.”
How to lower your fees
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It’s worth looking around to cut your fees, Hamrick said.
In addition to looking at traditional banks, check out credit unions and online institutions too. Digital technology opens up options beyond what is physically nearby.
“Shopping for the best banking services may not be as exciting as buying a new outfit, new electronic device, or new car,” he said. “But if we don’t, it can make all the difference in whether we hit our financial goals or not.”
Some banks offer accounts with no monthly fee and no minimum balance. CNBC vote for the Capital One 360 checking account as the best toll-free checking account, with ally interest checking account in second place.
The best way to avoid ATM fees is to use an ATM on your bank’s network. Credit unions and smaller banks usually have networks with more ATMs that customers can use free of charge, according to Bankrate. Online banks may also have national networks that can increase the number of ATMs that are available to you for free. Some also offer a refund for the fees charged by providers outside the network.
If you still can’t find a toll-free ATM, you can get 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 total net worth $ 211 billion. Some are banks and some are credit unions.
While fees will vary from institution to institution, they generally won’t be high, he said.
“It is built into the job of these financial institutions not to charge enormous fees to people who are already in a low- or middle-income community,” Holdsclaw said.
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