Belonging to a specific social class influences your spending preferences and priorities. The rich and middle class may experience more happiness from purchasing experiences, while lower-income individuals may find that material purchases make them happy.
Despite the economic disparities, you may notice that the poor are likely to spend more on services they deem convenient and affordable but, in contrast, are more expensive.
Read on as we explore 12 common services that poor people spend on that the rich and middle class don’t.
Grocery Delivery Services
Lower-income people will often be busy working two or three jobs in a day and will look for a way to reduce visits to the grocery stores. While grocery delivery services seem convenient, you’ll still have to pay for delivery and tip the driver.
Some stores will require you to pay an annual fee, which can be a waste of money if you only use the service occasionally.
High-Fees Checking Accounts
Lower-income individuals struggle to maintain enough balance in their checking accounts to reduce monthly fees. That means they can spend up to $10 monthly to keep a checking account open. These high fees may lead to financial strain.
Apart from the monthly service fee, you also need to account for overdraft fees, foreign transaction fees, ATM fees, etc, which are expensive.
Rental Furniture and Appliances Services
Low-income people don’t have enough to spend on new purchases and often resort to renting furniture, appliances, tools, and other things. While this may seem economical, it could lead to long-term payments at inflated rates.
Remember that most rental companies include fees like interest charges, rental fees, delivery fees, deposit service charges, and other fees like insurance in their cost. That means that even though the initial cost may seem reasonable compared to purchasing a new item, the other charges could add up quickly, making rental services more expensive.
Rent-To-Own Services
Many poor individuals with low credit scores find the rent-to-own concept alluring as it allows them to own items they may not be able to afford. Unfortunately, the cost in the end is higher than purchasing the item upfront. Apart from the interest rate, you’ll have to account for processing fees, state sales tax, installation fees, delivery fees, etc.
Check-Cashing Services
Although check cashing services allow you to cash checks without having a bank account, most are expensive, with fees ranging from 1-2% of the check amount. People with a lower income may find it hard to open a bank account and instead choose costly check-cashing services.
The high fees chip away at their ability to have disposable income or pay bills on time, leaving them struggling financially.
Coin-Operated Laundromats
A fraction of people in the low-income group lack in-house laundry facilities. That forces them to rely on public laundromats, which can be costly over time.
High Auto and Renters Insurance
Lower-income individuals end up paying a lot for basic renters and auto insurance policies as they live in areas considered as high risk by insurers. Others fail to take advantage of policy discounts that one can earn when making advanced payments or bundling up multiple insurance products.
A few do not take the time to shop around for the best insurance deals due to limited time and resources.
Taxi and Ride Share Services
Poor people are the biggest users of taxi and ride-share services like Uber and Lyft. Most will opt for these services due to convenience and service quality rather than cost. Unfortunately, frequent Uber rides tend to be expensive, and you’re better off catching the bus or taking the train to reduce transportation costs.
Check Engine Light Services
People with a low income spend on check engine light services. While the exact repair costs vary depending on labor rates and the extent of the problem, diagnostic fees can be as high as $200.
Non-Essential Subscription Services
Poor people spend a lot of money on unnecessary subscription services. Paying for a streaming service when you only watch TV once a week is a waste of money, making it difficult to achieve your financial goals.
Tax Refund Advances
Opting for tax refund advance services sounds convenient but comes with high fees and interest rates. Many poor people will find themselves under unexpected financial strain and debt after signing up for a tax refund advance, as it’s not free money.
Refund advances have high-interest rates and other hidden fees. Additionally, if your tax refund advance is less than the amount borrowed, you’ll still have to pay the full balance.
Title and Payday Loans
While title and payday loans give you access to quick cash, they all feature high interest rates, and unfavorable terms and expose you to aggressive collection tactics. These two high-risk loans only provide quick access to money and should be used as a last resort.
Unfortunately, many poor people who need fast cash rely on these loans and could end up in a debt trap as they keep reborrowing or rolling over their loans. That only leads to incurring high fees over time.
Cheaper Alternatives
Although spending on these services may be optional to a few people, they represent a significant financial burden for those with a lower income. By finding cheaper alternatives, the poor can work towards building a more secure financial future.
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