The following is an excerpt from OpinionJournal’s “Best of the Web” at WSJ written by the editor, James Taranto.
Fear of Profits
The Huffington Post reports on the problem of “the unbanked and underbanked”–that is, “lower-income people without traditional bank accounts,” who number in the tens of millions:
Because banks can’t make much money off accounts with low balances, “they’re trying to repel these accounts with high fees,” said Mehrsa Baradaran, a professor at the University of Georgia’s School of Law who studies the unbanked.
Enter Walmart with a solution:
The retail goliath on Wednesday announced it would offer customers checking accounts with no minimum balance and no fees for overdrafts or bounced checks. Those who get a direct deposit of at least $500 every month–a floor that includes many people receiving government benefits–will have the $8.95 monthly fee waived.
In order to do this, Walmart had to work around regulations that protect traditional banks from competition:
In the mid-2000s, Walmart tried to get a federal bank charter so it could take deposits, a move widely opposed by the banking industry at the time. This new effort differs in that the services are provided through Green Dot Bank, but exclusively available at Walmart. To open an account, customers must buy a $2.95 starter kit from a Walmart store.
Big banks are responding by offering competing services:
Bank of America has a SafeBalance account, with a monthly fee of $4.95 and no overdraft penalties. Citibank’s Access Account, introduced Tuesday, has a monthly fee of $10 that can be waived if customers make one monthly bill payment or direct deposit, or if they average a monthly balance of $1,500 or more. The Citibank account doesn’t charge overdraft fees, either.
It sounds like a great free-market success. But the Puffington Host piece ends on an anxious note:
That Walmart is one of the few options available to poor customers looking for a cheap bank account is troubling, given the retailer’s profit motive, said Wallace Turbeville, a senior fellow at Demos, a progressive think tank. Unlike the Post Office, which some have considered as an option for low-fee checking, there’s no reason for Walmart and its partner bank not to take advantage of customers who have so little bargaining power, he said.
“There’s a huge number of people that are underserved or overcharged for financial services,” Turbeville said. “That suggests that its going to be profitable for Walmart.”
If you’re reading this column, chances are you’re affluent enough that you’re not among the “unbanked and underbanked.” Does it bother you that your bank makes a profit maintaining your account? Would you rather deposit your money with the post office? Why are these questions any less absurd when applied to people who make less money than you do?
For more “Best of the Web” click here and look for the “Best of the Web Today” link in the middle column below “Today’s Columnists.”
