The Right Bank Account for the Formerly Incarcerated

by
Adam Rust

If you are transitioning to life on the outside or if you are helping someone to do so, you may be researching for a bank account.

A bank account is a foundational tool for modern life. Most people want to shop online, swipe a card at the point of sale, and send money through P2P services like Venmo or Cash. Most retailers recognize that they have to take credit and debit cards to remain viable. You can get along without a bank account, but it will be much harder to do so. Living without a bank account means accepting the risk of keeping cash, of spending hours to transact, and paying fees to non-bank alternative financial service agents at each step of the way.

People returning from incarceration are no different – a bank account can make their life much more manageable. They need to open a bank account. It helps for all the reasons listed above but also for some of the unique payment needs faced by the reentry community.

Having a bank account smooths the rails.

Rather than trek across town during working hours to make a payment at the courthouse, a person can use a bank account to set up an electronic ACH payment. Timed saved – twenty minutes to two hours. Ditto for paying child support or restitution.

Other policies to ask about when you apply for an account:

- Does your bank charge a fee when the USPS returns a paper statement because it was not deliverable? Find out if they do – because paying an extra $25 just because you moved is no fun.

- Is there a fee to close your account?

Wage Garnishment

Having established why the formerly incarcerated stand to benefit from a bank account, the next thing to understand is that not all bank accounts suit the particular needs of the justice-involved. It isn’t just that some banks are universally better than others. No, the key takeaway is that some banks are better for this specific population.

For example, many banks charge a fee for processing a wage garnishment order.

Under Title II of the Consumer Credit Protection Act, garnishments cannot exceed the lesser of twenty-five percent of disposable income or the difference between pay and thirty times of the local minimum wage. In other words, if a worker earns $600 per pay period, then under the disposal income test the maximum garnishment would be $150 but under the minimum wage test in a locality with a $7.25 per hour minimum wage, the maximum garnishment is $382.50 ($600 minus $7.25 times 30). Therefore, in this example, the maximum garnishment under federal law is $150.

As you can imagine, the wrong account can be a problem. You need to make this choice with care. The benefits from the right account will pave your way to success. The wrong account can set you back.

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