In America, It Is Really Expensive Being Poor

Ildar Sagdejev/CC BY 4.0

From the grocery store to banking options, it's incredibly expensive to be poor in America.

For those Americans who fall short of middle class status, life is a seemingly endless parade of being nickeled and dimed, from bank fees to higher prices for grocery staples.

In the United States, it’s really expensive to be poor.

The Houston Chronicle’s Chris Tomlinson recently set out to uncover just how much more America’s poor are paying for their groceries than their more affluent counterparts, and what he discovered was far from surprising.

Poor people’s stores, as the Texas songwriter Kevin Russell calls them, have expanded from about 18,000 locations in 2010 to more than 30,000, according to the poverty fighters at the Institute for Self-Reliance.

These chains, which include Dollar Tree, Family Dollar and Dollar General among others, have plans to open another 20,000 in the next five years. They are beneficiaries of America’s growing income inequality, replacing retailers such as Sears and JC Penney that once served America’s middle class.

Poor people’s stores flock to distressed urban neighborhoods and struggling rural towns, oftentimes driving out full-service grocery stores with misleading prices and multiple locations, the institute reports.

Tomlinson shopped at three stores near the Chronicle — Costco, a Dollar Tree and a Family Dollar — to find out how much more the poor are paying for their groceries.

The big difference between the rich people’s store and the poor people’s stores, of course, is quantity. Rich people can buy more at once, while the impoverished live paycheck to paycheck. The better off can also afford to drive 20 minutes and pay an annual fee.

Folger’s Coffee at Costco sold in 51-ounce containers at 15 cents an ounce. At Family Dollar, it sold in smaller quantities for 31 cents an ounce. Raisin Bran at Costco cost 10 cents an ounce, at Dollar Tree, it was 14 cents.

Tomlinson also compared diapers and Campbell’s Cream of Mushroom Soup.

In the end, shopping at Costco was cheaper, even after considering the annual membership cost.

These bulk items totaled $31.34 at Costco. To get the same quantities at a poor people’s store would cost $64. Even after the $60 annual membership fee, Costco and most other groceries would be cheaper.

As for the poor people stores, business is booming and profits are soaring:

These high prices generate significant profits. Dollar General Corp. made double the profit of Macy’s with less revenue in 2017. Lower standards of living are good for their business.

“The economy is continuing to create more of our core customer,” Todd Vasos, Dollar General’s CEO told the Wall Street Journal last year. “We are putting stores today [in areas] that perhaps five years ago were just on the cusp of probably not being our demographic … and it has now turned to being our demographic.”

Similarly, America’s biggest, most profitable banks join in the fun of taking what they can from the poor.

According to a Washington Post report earlier this year, Bank of America altered the policy of one of its most popular checking accounts to the detriment of its poorer clients.

This week, Bank of America announced its free, no-minimum-balance checking account, popular with many low-income customers, will require a $1,500 minimum daily balance or $250 in direct monthly deposit (totaling $3,000 per year). If customers fall below that threshold, they will be forced to pay a monthly fee.

The optics are breathtaking, considering Bank of America made more than $21 billion in profits last year and will receive a multibillion-dollar present from Congress every year from now on, courtesy of the newly slashed corporate tax rate. To celebrate their profits and congressional largesse by putting the squeeze on their poorest customers puts even more icing on their already well-iced cake.

And that’s just one checking account offered at one bank:

Incredibly, more than a third of U.S. banks will reorder your transactions and post them not in chronological order, but from largest to smallest by dollar amount, which shoves you faster than necessary into the red and boosts the number of overdraft fees you owe. In only a few days, you could owe hundreds of dollars, creating a debt that, on your waitressing or child-care wages, will take months or years to pay back.

From food costs to banking fees, it’s expensive to be poor.

What about buying a car? Someone looking to steer clear of 25 percent interest rates on a car loan might want to pay cash for a vehicle.

If you save to buy from the dealership in cash, you may not be able to. “They wanted $1,900 for that car … and wouldn’t take cash for any of their vehicles,” said one low-income customer in Howard Karger’s book “Shortchanged: Life and Debt in the Fringe Economy.” “They wanted us to put $1,000 down and pay $89 a week for two years” — which amounted to more than $10,000 for a $1,900 car.


American low-income families face many challenges, and some of them require big, complicated solutions. Some are pretty easy to resolve: a modest legal protection; a little policy tweak; or a chief executive deciding the people who clean his office, tidy his hotel room and serve his lunch do not need to be penalized for the amount of money in their bank accounts.