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Big banks reach out to poor Americans: Beware?

Yahoo Finance
Yahoo Finance

Big banks are trying to drum up new business and they're setting their sights on low-income Americans. Bank of America (BAC) and J.P. Morgan (JPM) are offering struggling consumers low-fee banking and prepaid debit cards reports The New York Times. But this could represent more of a public relations move than a genuine money-making venture notes Yahoo Finance's Henry Blodget in the video above.

Big banks have come under regulatory scrutiny because of their dubious mortgage practices prior to the financial crisis. But Blodget doubts banks are approaching this group of consumers with "nefarious" intentions.

"It can be a good business and solves a real pressing problem," he says. "[Consumers] are starting relationships with banks so they can borrow money for a car or a home in the future."

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J.P. Morgan is promoting a prepaid debit card that costs $4.95 a month and comes with traditional banking perks. Bank of America has set up a banking account that could help low-income families from accruing overdraft fees. Even American Express (AXP) has been touting the benefits of banking with a promotional video hosted by actor Tyler Perry.

Blodget says it should not be surprising that banks' efforts to woo low-income families come with an attached cost.

"Banks are a for-profit organization," he explains. "They're not a charity. You do have to pay for some service and it's relatively affordable."

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