Why It Costs More to Be Poor: Highlighting Six Examples
In this article, we will discuss why it costs more to be poor. We will highlight six examples of how some things can be stacked against people in lower income brackets or people who are living paycheck to paycheck. We will shy away from proposing solutions and more so just highlight some of the issues and some things that I've noted over the past five years of how things can be really stacked against certain people.
Food: One of the Largest Expenses in Any Household
Food is one of the largest expenses in any household. In this specific category, let me just show you a chart here showing you the difference between small stores versus large stores and how this can negatively affect people in lower income brackets. There's something known as a food desert, and food deserts can be inner cities, or it could be in very rural areas. These food deserts tend to be where a lot of people in poverty or in low-income brackets tend to live. A lot of these big stores like Costco or Walmart or Trader Joe's tend to avoid these areas for a variety of reasons. The issue here is that when they avoid those areas, it ends up being something known as a food desert where the only food options for groceries or gas stations convenience stores like pharmacies like CVS's or things like Dollar General. The prices in those smaller stores end up being a lot more than something like Costco or Sam's Club or these bigger stores. A lot of people who are living paycheck to paycheck or don't have very much money, maybe they don't have a car, and so they can't afford to go drive to these various different locations to get the best prices on their groceries. People in lower income brackets end up paying more for food, or they end up getting fast food, which is also why I believe there is some correlation between poverty and obesity and other things as well because you end up having to go with whatever's nearby because you can't afford to get those other things.
Banking: Crazy Overdraft Fees
Banks in the United States made over 15 billion dollars in overdraft fees in 2019. I think in 2021-2022, they made about 10 billion dollars each year from overdraft fees. What this is is anytime that your bank account goes below zero dollars, maybe you use your debit card to buy some gas or buy some food, and if it goes below zero dollars, they will charge you this overdraft fee. Sometimes it's around 35 give or take depending on the bank, and this affects people who are obviously very much living paycheck to paycheck. They are footing the bill for all these different things, and it can get really expensive. Some people might say, "Why don't you just not overdraw on your account?" In a lot of cases, people who say that probably have never experienced poverty.
Payday Loans: Extremely Predatory Loans
Payday loans are extremely predatory loans that go after people who are in those lower income brackets where they say, "Maybe you're struggling to pay your bills. We will front you some money. We'll get you paid a couple of days early." The problem here is that this is a very, very bad cycle in a lot of cases. The people who end up doing payday loans, who end up using them, are ones that couldn't even get a credit card, and so they get a payday loan, and the APR on that can be sometimes three, four, five hundred percent, and it ends up in this really bad cycle.
Parking Tickets and Feeding Tickets
When you look at parking tickets and feeding tickets as a proportion of someone's income, it can really negatively affect someone who is poor much more than it would someone who is wealthy. Let's say that you get a 100 parking ticket for you know you park in the wrong area. It happens, right? Maybe you didn't see a sign, whatever. Now, if you're making 400 a week, there goes 25 of your income that week that goes towards that parking ticket versus if you're making four thousand dollars a week, that's 2.5 percent of your income. You probably don't even notice a parking ticket, and you just pay it off and do whatever, and you don't really care.
Regressive Taxes
There are some taxes that have regressive sort of features to them. Look at something like the soda tax in the city of Philadelphia. The city of Philadelphia instituted a 1.5 Cent tax per ounce on any type of sugary drink, soft drink, diet soda, like most different types of drinks inside the city. 1.5 cents per ounce of those drinks. Now, if you're buying like a 64-ounce bottle of soda, that's going to be about a dollar extra you're paying for that. This is a regressive tax, and it can be really difficult for people who are not making very much money or who are living paycheck to paycheck.
Credit Cards and Credit Card Processing Fees
Credit cards and credit card processing fees generally are bad for people in lower income brackets. Credit cards are like this secret tax that people don't even realize that they're paying. A lot of people who are poor or who are living paycheck to paycheck, a lot of them are using cash or they're using debit cards, and then wealthier people, middle-upper class, anyone in that category tends to use credit cards and the points and all that. To the merchant, the grocery store, they're actually paying anywhere between one and a half and three and a half percent for processing fees basically to get that money from your card into the grocery store's bank account. They have to pay fees all along the way, and this can be a few percent. To the consumer, you don't really feel like you're spending any extra money, but it's like this silent tax that's involved that a lot of people don't realize.
Conclusion
In conclusion, these are some of the reasons why things can be stacked against people who are in those lower income brackets. Food, banking, payday loans, parking tickets, feeding tickets, regressive taxes, and credit cards are some of the examples that we have highlighted. These issues can be really difficult for people who are not making very much money or who are living paycheck to paycheck. It's important to be aware of these issues and to try to find solutions to them.
Highlights
- Food deserts tend to be where a lot of people in poverty or in low-income brackets tend to live.
- Banks in the United States made over 15 billion dollars in overdraft fees in 2019.
- Payday loans are extremely predatory loans that go after people who are in those lower income brackets.
- Credit cards and credit card processing fees generally are bad for people in lower income brackets.
- Regressive taxes can be really difficult for people who are not making very much money or who are living paycheck to paycheck.
FAQ
Q: What is a food desert?
A: A food desert is an area where there is little to no access to fresh, healthy, and affordable food.
Q: What are payday loans?
A: Payday loans are extremely predatory loans that go after people who are in those lower income brackets where they say, "Maybe you're struggling to pay your bills. We will front you some money. We'll get you paid a couple of days early."
Q: What are regressive taxes?
A: Regressive taxes are taxes that take a larger percentage of income from low-income earners than from high-income earners.
Q: Why are credit cards bad for people in lower income brackets?
A: Credit cards and credit card processing fees generally are bad for people in lower income brackets because they end up raising their prices in a lot of cases by a few percent to make up for that fee.
Q: What is the solution to these issues?
A: It's important to be aware of these issues and to try to find solutions to them. Some solutions could include increasing access to healthy food options, regulating payday loans, and finding ways to reduce credit card processing fees.
