Why It Costs More To Be Poor

so in this video we're talking about why it costs more to be poor I'm going to highlight six examples of how some things can be stacked against people in lower income brackets or people who are living paycheck to paycheck now I don't want to get political in this video okay so we're going to kind of shy away from proposing Solutions and more so just highlighting 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 so let's talk about it here in today's video and the first one is food which is one of the largest expenses in any household now food 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 so you can see the difference between these two uh what happens is that there's something known as a food desert and food deserts can be inner cities it could be in very rural areas but these food deserts tend to be where a lot of people in poverty or in low income brackets tend to live and so a lot of these big stores like Costco or Walmart or Trader Joe's they tend to avoid these areas for a variety of reasons um but 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 and the problem here is that the prices in those smaller stores end up being a lot more uh than something like Costco or Sam's Club or these bigger stores so you can see the price differences here now this is from 2014 so some of these prices are a little bit off but the differences in prices are probably very similar today and so looking at some of these over 50 percent savings by going to one of these big stores rather than a small one and another issue here is that 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 and it's also very difficult to like lug groceries around on the public transportation on a bus or walking to the store if they have to and so what ends up happening is that 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 correlations between poverty and obesity and other things as well because you know you end up having to go with whatever's nearby because you can't afford to get those other things so that's something I think is very um very sad I don't know what the solution to that is I just wanted to highlight it there um but let's talk about how some other things are stacked against uh people in lower income brackets but specifically here we're talking about banking okay banking is crazy so uh 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 and what this is um 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 um and so they are footing the bill for all these different things and uh it can get really expensive now you know some people might say well why don't you just not overdraw on your account uh and in a lot of cases people who say that probably have never experienced poverty um yeah this is something that's pretty crazy to see that banks are making so much money from overdraft fees 15 billion dollars in 29 19 that is a lot and then also let's say that you know maybe you have a few hundred dollars you go to your local bank and you say hey I want to put this into a bank account I want to open an account they're going to charge you sometimes 10 or 20 dollars per month because the bank looks at and says and we can't really make a lot of money off of you so we're going to charge you to have a bank account here and that's what happens at a lot of big Banks all around the country now sure there are ones that don't have fees uh for account minimums but a lot of them still do have those account minimum fees and that can really add up a lot for people who are generally not making very much money um and then the third thing that I think is really kind of disgusting is payday loans so payday loans these are extremely predatory loans that go after people who are in those lower income brackets um where they say you know okay you know maybe uh you're struggling to pay your bills we will front you some money we'll get you paid a couple days early but the problem here is that this is a 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 and it's just something that really irks me when I see a lot of payday loans uh and they're running ads everywhere they're offering people money up front um and it's just it's it irks me quite a bit to see things like that because they're taking advantage of people who are in very tough situations all right now I want to briefly mention the sponsor today's video which is Cash

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would someone who is wealthy so 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 say 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 um and so seeing it that way if you look as a proportion of income it can be really difficult for people uh who are not making very much money or who are living paycheck to paycheck and that kind of leads me into one of the final points here that I want to share with you which is regressive taxes and as I said earlier I don't want to get political here but it's good to know that there are some taxes that uh have regressive sort of features to them so look at something like the soda tax in the city of Philadelphia I wrote a lot of papers on this back in 2016 when I was in college but basically 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 now this is a regressive tax um and you know I'm not a big fan of taxes in general okay uh in you know cities governments they love taxing anything they can get their hands on it's kind of annoying but um anyway so this regressive tax does it actually stop people from buying soda no not really but what it does is it pulls a lot of money out of people's pockets generally people who maybe you know live in the city especially in Philadelphia which is a city that has a really high poverty rate so they're basically paying all this extra tax and as a proportion of their income it's quite a bit um so regressive taxes this is you know something that I think is good to be aware of them and I want to share something else with you which is that uh credit cards and credit card processing fees uh generally are bad for people in lower income brackets I want to explain why so I was reading an article on Vox about this which we obviously know Vox is kind of a garbage News Network but they quoted a pretty reliable source here which was uh the Boston fed the Federal Reserve uh in Boston okay and so what the Boston fed found is that uh people who are high income consumers pay an average of 13 less per month through retail prices and people in those lower income brackets uh pay about 60 cents more all due to slight fees on Merchants so let me explain how this works so credit cards are like this secret tax that people don't even realize that they're paying okay and so what happens here is that a lot of people who are poor or who are you know 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 right and so when you go to the store let's say you go to a grocery store you spend a hundred dollars you can either you know pay them with cash and give a 100 bill or you can tap your debit card

tap your credit card right you can do that now to you it doesn't feel any different so a lot of people just end up doing the card because you don't have to deal with coins and cash and everything else but to the merchant to the grocery store they're actually paying anywhere between one and a half and three and a half percent uh 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 so 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 now to people who have credit card points and they get cash back well you know that's you don't really feel the effect because you know you're getting like two percent cash back or you're getting some points you're getting some miles uh but if you're paying cash you're secretly footing this bill for the people who are kind of playing the credit cards points game uh and the way that you're doing this is because the merchant the grocery store well they're you know they're paying that three percent fee for interchange fees card processing to Visa Mastercard Banks everything else and they're not going to just eat that cost they're going to pass that cost onto the consumer so they end up raising their prices in a lot of cases by a few percent to make up for that fee and so I don't want to say that like doing the credit cards point game is bad because I have credit cards I like you know getting free hotels I like getting free flights and everything else um but you can see how this can affect people um who are basically footing the bill for that uh so just another thing to be aware of there and I'm not really sure what the solution is there and so in a sense it's almost like this transfer of wealth from lower income people to higher income people uh and this is we're talking tens of billions of dollars through credit card points uh in this manner which is really interesting and I'm not really sure thoughts on that exactly what to think and like what to tell people uh specifically on that because you know I think like yeah like I'm gonna use a credit card because I'm going to get two percent cash back um but it's just something that I think a lot of people have not really thought about as well uh on that point there so uh those are some of the reasons why things can be stacked against people who are in those lower income brackets let me know your thoughts Down Below on you know maybe potential issues other issues that maybe I haven't highlighted um and then also what we could do about some of these um as well so thanks for watching the video I hope you found some value in it thanks Cash Out for sponsoring this video don't forget to follow me on Instagram follow me on Twitter uh shoot me a DM always happy to answer those so thanks for watching and I'll see everybody sometime in the future