Skip to Content

10 Sneaky Hidden Fees that Target Low Income Americans

10 Sneaky Hidden Fees that Target Low Income Americans

$11 billion in overdraft fees, $1.6 billion in check cashing fees, and up to $9.8 BILLION in payday loan fees are charged to low income Americans every single year. To break it down, that means that more than $61 million in fees are collected from broke Americans every single day – and that number doesn’t even include all the other scams and schemes that target people on a daily basis!

In this article, we’re going to dive into 10 of these sneaky fees that are draining wallets nationwide and show you how to protect yourself. 

Overdraft Fees

First, let’s tackle those overdraft fees. These are the fees that banks charge when you don’t have enough money in your account to cover a payment. Banks will “generously” cover that cost for you and then charge you an average of $34 for every transaction that puts you into the red.  

Here’s a personal horror story: Years back, a bank I will never use again reordered my transactions so that my rent went out first. This was a problem because I’d carefully timed everything so that I would only overdraft on one big bill, my rent, instead of dozens of smaller expenses. When they reordered it all, each one of those smaller transactions pushed me further and further into the negative. There were about a dozen transactions, some as small as $2, that added up to about $85 total… but each one came with a fee. When I couldn’t pay it back right away, I was hit with another round of so-called Extended Overdraft fees. I ended up saddled with a whopping $800 in overdraft fees by the time that nightmare was over.

Fortunately, since then, a lot of rules and regulations and lawsuits have changed how overdrafts are handled. Banks don’t reorder transactions much any more and many won’t charge you unless you go significantly below zero. For example, Chase won’t ding you unless you’re over $50 in the hole. 

But even with these changes, banks are still raking in billions of dollars in overdraft fees from the most vulnerable Americans. According to Matthew Desmond’s bestseller Poverty By America, about 84% of those overdraft fees are paid by people who typically have $350 or less in the bank.

So, how can you protect yourself? 

  • Decline any overdraft protection offers from your bank. It won’t give you 100% immunity from fees, but it reduces your chances.
  • Activate low-balance alerts to keep you in the know.
  • Consider switching to a bank that has sworn off overdraft fees entirely.

Chime, for instance, offers a ‘SpotMe‘ feature that lets you overdraft up to $200 without penalties. Ally Financial’s ‘CoverDraft‘ ensures you can dip $250 into the red without any fees. Choose a bank that isn’t going to hit you with those fees whenever you make a mistake or have an unexpected bill pop up.

Prepaid Cards

A lot of low income people fall into the opposite trap of believing that avoiding banking altogether will help them save money. I’ve heard from tons of people who use prepaid cards and check cashing services to avoid bank fees, but that can cost you more in the long run. 

Prepaid cards might seem like a great alternative, especially if you’re trying to control spending. But here’s the catch: they often come packed with fees. Activation fees, monthly fees, transaction fees, ATM fees, and even fees to check your balance. Over time, these charges can add up and eat away at the very money you were trying to save. 

How can you protect yourself?

  • Always read the fine print before purchasing a prepaid card.
  • Compare various cards and their fee structures.
  • Consider opening a fee-free bank account instead.

Many banks now offer no-fee basic checking accounts, and digital banks like Chime provide accounts with minimal fees and even cashback rewards.

Check Cashing Fees

With the convenience of instant check cashing services, you can get your cash in hand right away. But there’s a catch: hefty fees.

These services can charge up to 3% or more of the check’s value. For a $1,000 check, that’s $30 gone in seconds. For someone struggling to make ends meet, every dollar counts. It is heartbreaking that over $1.5 billion is spent on check cashing services every single year. 

If you’re currently stuck in this cycle, consider alternatives like opening a no-fee checking account at a bank or credit union. There are plenty of second-chance banks that will work with you even if you’ve had an account closed due to an overdraft. We have a list of those providers on our website and there are many to choose from. 


It’s not all about banks, though, either. Isn’t it crazy how everything seems to be on a subscription model these days? From streaming services to unlocking your car’s advanced features, it seems like we’re on a never-ending payment loop. And while some of these services can be convenient or even necessary, the costs can accumulate rapidly. 

Here’s a little secret I’ve discovered over the years: even if you aren’t ready to part ways with a service, you might want to hit that ‘cancel subscription’ button anyway. You’d be amazed at how fast providers will jump into action to keep you.

Just last week, I was hit with an unexpected $80 annual fee for a service I’d forgotten about. When I moved to cancel, the website immediately offered to permanently drop my price to $30 for the lifetime of my account. That’s a $50 per year savings in just seconds! 

I’ve made it a habit now. Whenever I start a new subscription, I try to cancel within a week. More often than not, I’m interrupted halfway through the process by a prompt with an even sweeter price. 

And this isn’t limited to online subscriptions, either. I’ve haggled down my phone, internet and cable bills just by hinting that I might leave for a competitor. 

Companies prioritize keeping existing customers because it’s cheaper to retain your current customers than to find new ones. Showing you’re ready to walk away often nudges them to offer you better deals. While results can vary and this is not a guarantee, it’s a simple trick that’s saved me a bundle over the years and could do the same for you!

Credit Monitoring Fees

And speaking of paying too much for a service, let’s talk about those credit report fees. You are entitled to a free credit report every year but many people get lured into paying for credit reports or monthly credit monitoring services. Companies often advertise better insights or more detailed analysis, but in reality, the core information is the same.

Every American is legally entitled to one free credit report annually from each of the three main credit bureaus: Equifax, Experian, and TransUnion. This means you can actually check your credit for free three times a year, once from each bureau. To access your free reports, the only authorized website is

Remember, regularly checking your credit report isn’t just about knowing your credit score. It’s a vital tool for catching errors or signs of identity theft early. But don’t be fooled into paying for something that’s rightfully yours for free. Most of the scores shown in these credit reporting tools don’t accurately reflect what lenders see anyway. 

Tax Prep Fees

Don’t get fooled into paying fees to file your taxes, either. Low-income Americans can file their taxes for free. 

If your income is below a certain threshold (which changes yearly but is typically for low to moderate-income earners), you’re eligible to use the IRS’s Free File program. This program provides free tax preparation software from leading companies, making the filing process straightforward.

Additionally, many communities offer the Volunteer Income Tax Assistance (VITA) program, providing free tax help to those who qualify. Trained volunteers can help you prepare and file your taxes, ensuring you get the credits and deductions you’re entitled to.

Always do your homework before paying to file your taxes. Free and trustworthy resources are available, ensuring that more of your hard-earned money stays in your pocket.

Extended Warranties

Here’s another thing that sucks money away from low income people: extended warranties. 

They sound great in theory: pay a little extra now to avoid a costly repair or replacement down the line. But here’s the truth about extended warranties – they’re often not worth the price tag. These warranties can be riddled with loopholes and caveats, and there’s a chance you may never use them.

Statistically, if a product is going to fail, it often happens within the standard warranty period. And if it breaks down after, the cost of repair or replacement might be similar to or even less than the price of the extended warranty.

Instead of automatically opting for an extended warranty, do your research. Check product reviews for durability concerns, and consider setting aside the money you’d spend on the warranty in a savings account. That way, if the product does malfunction, you’ve got a repair fund. If it doesn’t, that money can go to better use.

Unlimited Plans

That’s not the only sales tactic that siphons money away from families that need it, either. 

I know “Unlimited” sounds tempting but the truth is, many unlimited plans just aren’t worth it. Whether it’s for mobile phones, streaming, or other services, most unlimited plans offer more than the average person truly needs. And here’s the kicker: they often come at a steeper price.

Before committing to an ‘unlimited’ plan, consider how much you truly use the service. For phone plans, examine your data usage for the past few months. Do you even come close to the limits of a cheaper plan? For streaming services, how often do you really watch or listen? Sometimes, a plan with a set limit or a different streaming platform can offer you all you need at a fraction of the cost.

Remember, it’s not about having “unlimited” access; it’s about having enough for your needs without pouring money out on products you aren’t going to use.

Rent to Own Fees

And on that note, let’s talk about rent to own fees.

Renting to own may seem like a convenient way to get what you want now and pay for it over time. Whether it’s furniture, electronics, or appliances, rent-to-own promises the dream without the immediate financial pinch. However, there’s a hidden side to this arrangement: high fees and interest rates.

Over time, you might end up paying significantly more than the item’s original price. In fact, many rental stores charge two to three times the price of the item upfront and then tack on hefty fees and interest charges beyond that. 

The monthly payment might seem manageable, but add them up over the payment term, and you’ll see the stark reality. Additionally, if you miss a payment, you could face hefty late fees or even risk losing the item you’ve been paying on – even if you’ve already paid more than the item is actually worth.

If you’re considering rent-to-own, always compare the total cost to the retail price of the item. Often, it’s cheaper in the long run to save up for a few months and buy outright. If that’s not feasible, looking for second-hand options or waiting for sales can be a more cost-effective way to get what you need. Don’t be enticed by their tricks!

Payday Loans

Now finally, let’s talk about payday loans. These are short-term loans infamous for their astronomical interest rates. Often marketed as quick fixes for financial emergencies, they can swiftly turn into long-term debt nightmares. Many borrowers find themselves caught in a vicious cycle, taking out new loans to pay off old ones, resulting in escalating debt and fees.

Payday lenders swallow almost $10 billion from low income Americans every year. That is a ridiculous sum of money!

Avoiding these loans is the best advice but I know that’s not always doable. Emergencies happen. But if you’re in a pinch, please look at all of your other alternatives first. Look at the emergency assistance programs we’ve reported on, set up payment plans or forbearance with your creditors, try to get an advance pay from your employer, or borrow money from friends or family if you can. Even credit cards have lower interest rates than payday loans.

Remember, the real cost of a payday loan isn’t just the money you borrow, but the exorbitant fees and interest that accompany it. Be sure to read the fine print, understand the terms, and explore all other alternatives before you resort to this.


There are many different types of fees that prey on low income Americans but payday loans, overdraft fees and check cashing fees are some of the worst. The fees in this list are mostly avoidable if you follow the steps we’ve outlined, so start protecting your budget today!

Nicole is the owner and lead researcher for Low Income Relief. She has over 20 years of professional research and writing experience, and she has been solely dedicated to investigating low income topics for the last 10 years. Nicole started Low Income Relief after a personal experience with poverty. When her husband was medically discharged from the US Army, their family experienced tremendous financial hardship. Nicole was able to gather help from multiple community agencies and move into a nearby low income housing unit in just two weeks! Since then, Nicole has been dedicated to helping low income families in crisis. She regularly spends hundreds of hours combing through countless resources to make sure that Low Income Relief has the most comprehensive and complete resource directories on the internet today. Prior to starting Low Income Relief, Nicole worked as a novelist, journalist, ghostwriter and content creator. Her work has been featured in various print and online publications, including USA Today, The Daily Herald, The Chronicle and more. Her work has also been featured by Google for Publishers and other leading industry publications.