Banks making money by luring the poor

All banks, irrespective of their size and stature in the financial market, are finding ways and means to get the revenue pouring, despite the increasingly stringent regulations governing them. It is the way in which these banks make money that differs one from the other. One of the strategies that are being adopted by banks today are to offer consumer products to low income group of people and charge them high interest rates and exorbitant fees.

A number of leading banks in the country, including Wells Fargo, US Bank, Regions Financial and more have been busy attracting consumers in the low income group to sign up for various banking products they have on offer, including payday loans and prepaid debit cards. Most of these products designed for the low income group have been laced with different types of charges and fees.

The main question however is why banks are taking this step. The answer is that, in addition to bringing in huge fees, the banking products being offered to these consumers are not governed by the reforms of the Dodd-Frank Act. This implies that banks have come up with a new money making strategy despite the norms being tightened by the Federal Reserve. When customers in the low income group visit one of these banks offering low income group products, they are welcomed with open hands and offered different financial products including the prepaid debit card, short term loans and even check cashing options. Though they are made to feel prominent and well taken care of, these consumers are still way behind the customers with high balance checking accounts who are given more prominence by the banks.

One of the banking analysts in the country, Nancy Bush, explaining this concept in simple terms said that people have always viewed banking in the context of electrical switches where you can just flip them on in case you need their assistance. However, this is far from the truth because the main objective of the banks is bringing in profits for shareholders as compared to providing better business to consumers.