There’s a term economists use for a pattern most people have felt without ever naming it: the poverty premium. It’s the finding that low-income households often pay more, not less, for the exact same essential services — banking, credit, insurance — that higher-income households get access to more cheaply, or for free.
It isn’t one villain or one bad decision. It’s a set of overlapping systems — banking, credit reporting, insurance pricing, and lending law — that quietly charge people more for having less. Here’s how that shows up specifically for Marylanders, and where the state’s protections help close the gap and where they don’t.
The Cost of Staying Unbanked
Statewide, 22% of Maryland households are un- or underbanked, and being unbanked can cost a household an estimated $40,000 over a lifetime — money that goes to check-cashing fees, money orders, and prepaid cards instead of staying in a household’s pocket. A check-cashing store can charge up to 9.9% per check. Cash a $500 paycheck every two weeks at that rate and a household loses more than $1,200 a year — money that would otherwise cover groceries, a car repair, or a month of childcare.
Nationally, the pattern is consistent: the FDIC’s most recent household survey found 5.6 million U.S. households had no checking or savings account in 2023, and unbanked rates remain far higher among households with lower incomes and less formal education. The most common reason people give for not having an account isn’t distrust or preference — it’s that they don’t have enough money to meet a bank’s minimum balance requirement. In other words, many households are locked out of the accounts that would help them keep more of what they earn, precisely because they don’t have enough money to qualify for one.
This is the mechanism at the center of the poverty premium: the fee structures built around low-balance risk end up costing low-balance households the most.
How a Thin Credit File Raises Everyday Costs
A parallel version of the same problem plays out in credit. Roughly 45 million U.S. adults are either “credit invisible” — meaning the major credit bureaus have no file on them at all — or have a credit file too thin or too stale to generate a usable score, according to the Consumer Financial Protection Bureau. Without a scorable file, a landlord may ask for a larger security deposit, a utility may require an upfront deposit that a longer-established customer wouldn’t pay, and a lender may decline an application outright.
Insurance follows the same logic. Most states, including Maryland, allow insurers to factor a credit-based insurance score into auto and homeowners premiums. The Federal Trade Commission’s study for Congress found that these scores are effective predictors of the claims a policyholder is likely to file — but also found that they correlate with income and financial history in ways that can result in lower-income policyholders paying more for coverage on average, independent of their actual driving record or claims history.
None of this is a single company acting in bad faith. It’s several ordinary, individually defensible business practices — deposit minimums, credit-based pricing, thin-file underwriting — that stack on top of each other and land hardest on households that already have the least room to absorb an extra cost.
What Maryland’s Usury Law Does — and Doesn’t — Fix
Maryland has some of the stronger consumer lending protections in the country. Under the state’s Interest and Usury Subtitle and Consumer Loan Law, small, unsecured loans of $2,000 or less are capped at 33% interest, and loans between $2,000 and $6,000 are capped at 24% — with a fallback constitutional rate of just 6% absent a written agreement. These caps are a big part of the reason traditional storefront payday lending, which nationally can carry interest rates as high as 400%, has never taken hold in Maryland the way it has in states without a rate cap. When the Maryland Commissioner of Financial Regulation found a California lender was structuring loans to evade the usury cap, the state’s highest court upheld sanctions against the practice — a signal of how seriously the cap is enforced.
But a rate cap only reaches products that are legally defined as loans. It doesn’t touch a check-cashing store’s per-check fee, a landlord’s security deposit policy, or an insurer’s credit-based pricing model — all of which can extract a comparable amount of money from a low-income household without ever charging a cent of “interest.” Maryland’s usury protections close one significant gap. They were never designed to close all of them.
Why This Isn’t a Financial Education Problem
It’s tempting to read all of this as a knowledge gap — as if the fix is simply teaching people to budget better, shop around more, or negotiate harder. But nothing in the pattern above is caused by a lack of information. A household that fully understands check-cashing fees still needs cash today to pay rent. A renter who knows exactly why their security deposit is higher still has to pay it to move in. A driver with a spotless record still can’t out-budget a credit-based insurance score.
That’s precisely why CASH Campaign of Maryland’s programming is built the way it is. Bank On Maryland exists to remove the fee structures that penalize low-balance households, not just to explain them — every Bank On certified account guarantees no overdraft fees, no more than $5 in monthly fees, and free deposits, withdrawals, and bill pay. Free tax preparation puts refunds and credits directly into a household’s hands instead of a preparer’s. Free financial coaching helps Marylanders build credit files and savings cushions sized to their actual budget, not a national average. And benefits screening connects households to support they’ve already earned but may not know how to access.
The poverty premium isn’t a personal failing, and it isn’t solved by information alone. It’s a structural pattern — and closing it takes structural tools, not just better advice.
Learn more about CASH Campaign of Maryland’s free financial coaching, tax preparation, and Bank On Maryland accounts at cashmd.org.
Sources:
FDIC, “2023 FDIC National Survey of Unbanked and Underbanked Households” — fdic.gov/household-survey
Bank On Maryland, “Bank On Maryland” (unbanked/underbanked rate and lifetime cost figures) — bankonmaryland.org
CASH Campaign of Maryland, “What Is Bank On Maryland — and Why Does It Matter for Your Community?” — cashmd.org
Consumer Financial Protection Bureau, “Technical Correction and Update to the CFPB’s Credit Invisibles Estimate” (June 2025) — consumerfinance.gov
Federal Trade Commission, “Credit-Based Insurance Scores: Impacts on Consumers of Automobile Insurance,” Report to Congress — ftc.gov
Maryland Commercial Law Article, Title 12, Subtitles 1 (Interest and Usury) and Consumer Loan Law; Maryland Constitution, Article III, Section 57 — Maryland Office of the Commissioner of Financial Regulation — labor.maryland.gov/finance
Chapman and Cutler LLP, “New Maryland Court Decision: Potential Impact on Consumer Marketplace Lenders” (CashCall v. Maryland Commissioner of Financial Regulation) — chapman.com