A couple of months ago I recommended Spent: Looking for Change, a 2013 documentary – sponsored by American Express and narrated by Tyler Perry – which focused on everyday Americans shut out of the finance system most of us take for granted. Available for viewing on the Spent Movie website and YouTube, the documentary noted that many of these Americans turn to pawn shops, check cashing services; and use payday and title loans to meet basic financial needs.
Of course the practice is quite costly. It has been calculated that $89 billion a year goes to fees and interest for using these types of alternative financial services.
According to the Pew Charitable Trusts’ Safe Small-Dollar Loans Research Project, an estimated 12 million Americans take out payday loans each year. On average, these borrowers take out eight loans per year, averaging $375 each. The fees over the course of a typical two-week loan? They averaged $15 per $100 borrowed, amounting to a 391% annual percentage rate.
This film stresses that it is time for change. The idea is that new technology, new ideas and encouraging dialogue around this issue can help make managing money simple and more affordable.
It now looks like there may be another option, a low-cost alternative to traditional banking accounts from … wait for it, wait for it … Walmart. That’s right. After years of being stymied by the well monied banking industry, Walmart is making its biggest foray yet into everyday financial services by teaming up with Green Dot – a company known for its prepaid payment cards – to supply checking accounts to almost anyone over 18 who passes a simple identification check.
According to a Walmart spokesperson, the accounts are intended to be low-cost alternatives to traditional bank checking accounts, with no fees for overdrafts or bounced checks and no requirement for a minimum account balance. The new accounts, called GoBank, will cost customers $8.95 a month if they have direct deposits totaling less than $500 a month and will be available nationwide by the end of October.
What do you think? Will Walmart’s latest effort to break into the banking industry be successful for them and will it help those that might otherwise be shut out of the traditional banking system?