NEW YORK (AP) – As the coronavirus crisis took hold, Akeil Smith’s employer reduced his home help job to 25 hours per week. Her salary of $ 15 an hour was no longer enough to pay her a monthly rent of $ 700, and she had to go to pantries to get groceries.
While millions of working Americans have already received a quick relief payment from the federal treasury by direct deposit, Smith is among the millions without traditional bank accounts who have to wait weeks for paper checks. When the checks finally arrive, this disproportionately black and Hispanic population often has no choice but to use expensive check cashing services to access the money.
“I’m living check for check, and right now I need more groceries,” Smith, 35, told The Associated Press as she stood inside Payomatic, a small store. cashing checks in a predominantly black neighborhood in Brooklyn.
In the six weeks since much of the U.S. economy was shut down by the pandemic, more than 30 million U.S. workers filed for unemployment insurance. Congress passed a $ 2.2 trillion economic bailout.
In April, the government began sending $ 1,200 for each individual, $ 2,400 for each married couple and an additional $ 500 for each dependent child to poor and middle-class families across the United States. The wealthiest families receive either a reduced payment or nothing depending on their income.
To facilitate the delivery of payments, the government has launched an online portal for people to provide their banking information for direct deposit. But this system offered nothing to people without savings or checking accounts.
A House Ways and Means Committee memo obtained by AP estimates that around 5 million paper checks will be issued each week, meaning those most in need could wait several weeks for their payments.
In Houston, Ta’Mar Bethune, 41, a mother of four grown children raising a grandchild, will likely wait a while. As a younger woman, she struggled for years to pay the bank account fees until her account was closed. In the 1990s, she was also the victim of identity theft and never fully recovered.
More than 20 years later, Bethune still can’t pass a standard background check to open a checking account because the banking system considers her too risky, she said. To get by, she transfers the money she earns as a professional hairdresser and babysitter to a non-bank debit card.
“They charge you an arm and a leg,” she said, citing a monthly fee and a fee for each hit or withdrawal. “You never get all your money. It’s bad, but I have no other choice.
Bethune receives financial coaching from the Houston Area Urban League, a nonprofit organization that helps low to moderate income families examine their spending and saving behaviors. The organization says many families are reluctant to open bank accounts, especially if they have been burned down by the system.
“No one wants to be exploited,” said Carmela Walker, the group’s financial coach.
According to the Federal Deposit Insurance Corp, about 8.4 million US households were considered “unbanked” in 2017, meaning no member of the household had an account. of households also used an alternative financial service for money orders, check cashing, international remittances, payday loans and pawn shops, often at high costs.
Some of these services have been criticized for being predatory and marketing to black and Hispanic communities, which are disproportionately unbanked. About 17 percent of black households and 14 percent of Hispanic households did not have a bank account in 2017, compared with just 3 percent of white households and 2.5 percent of Asian-American households, the FDIC said.
Banking is a social justice issue with the potential to widen the racial wealth gap in the United States, said Cy Richardson, vice president of the National Urban League.
“Black America’s economic fate exists on a razor’s edge right now,” said Richardson.
Advocates say the federal government should use pandemic payments as an opportunity to get more people into the banking system through Bank On accounts, which are FDIC insured, cost $ 5 or less per month, and don’t authorize overdrafts or do not charge insufficient fund fees. Accounts can be used for direct deposit, purchases, and bill payments.
Otherwise, long lines at check-cashing stores could extend into the fall and pose dangers to public health.
“There is now an element of health to not being banked – people are going to have to take literal risks with their health in order to receive and then spend these dollars,” said Jonathan Mintz, CEO of the Cities for Financial Empowerment Fund, which aims to get underserved Americans set up with affordable bank accounts.
The opportunity to attract customers with relief payments is not lost on check-cashing and payday loan companies, an $ 11.2 billion network of stores in cities large and small.
In Brooklyn, B&H Check Cashing, in the predominantly Hispanic neighborhood of Bushwick, displays its check cashing rates on a wall. A check for $ 1,200, for example, would cost $ 26.76 to cash.
Essence Gandy, 26, stood in a line of two dozen people who snuck past a PLS Check Cashers in Brooklyn to cash change at a Coinstar kiosk. Her checking account was closed months ago because she didn’t have enough funds and couldn’t get back into good standing.
“I have bills on top of the bills,” said Gandy, who also has credit card debt and is behind in payments at a mattress store. She said she hopes to use the federal relief payment to catch up with her bills and will likely cash the paper check at PLS.
A representative for PLS, which has 300 locations in 12 states, said he has informed repeat customers that stimulus checks can be cashed at their lowest rates.