Placerville resident and Rural County Representatives of California (RCRC) CFO and COO Lisa McCargar understands this problem all too well. Her organization advocates for broadband access, water rights, and other infrastructure resources on behalf of thirty-seven rural California counties. Now, facing the COVID-19 pandemic, the importance of RCRC’s work has never been more apparent to McCargar. With nearly all of the businesses on Placerville’s Main Street closed, she worries rural communities may not have equal access to federal government aid programs that have been touted as crucial to propping up small businesses.

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Although Congress allocated more than $650 billion to lend to small businesses through the Paycheck Protection Program (PPP) that is being administered by the Small Business Administration (SBA), accessing an approved lending institution in communities like Placerville is easier said than done. Only 31 percent of the community banks chartered since 1986 remain in the rural financial sector. This has led to a significant challenge in accessing financial services, especially now. “Everyone was flocking to Citi and Bank of America to the point that they couldn’t handle it. It ended up that you needed to be a customer with an outstanding loan or at least an account,” McCargar noted.

Steve Frisch, CEO of the Sierra Business Council, is dealing with the same problem. His group, which advocates for the business community in the mountain region of California, has helped more than 500 small businesses apply for the loan program. Despite their assistance, he estimates that only 10 percent received funding. “If you already had a strong relationship with a bank and your bank was approved to lend, then you got funded. If not, you were out of luck,” Frisch said. This is partly the result of inadequate funding to smaller community banks, who despite providing capital to nearly 1.5 million small businesses in 2018, received 16 percent of second-round PPP funding.

In addition, the quick roll out of the program was a major learning curve for smaller lending institutions. Banks “got the guidelines at 3:00 p.m. and the program opened at 10:00 a.m. the next morning,” Frisch noted. This isn’t to say community banks weren’t able to process any applications. However, community banks reported that the system locked up because of the mass uploads by larger lending institutions. As a result, they had to manually enter applicant information, a process which is reported to take up to an hour.

It is worth noting that businesses owned by historically underrepresented ethnicities have been particularly impacted by these barriers. “COVID-19 exacerbated all pre-existing inequalities” Tara Lynn Gray, the CEO of the Fresno Black Chamber of Commerce said. Her group, which provides technical support to business owners of color, has helped 40 businesses through one-on-one sessions and nearly 330 businesses through webinars. “Not one business got funded in the first round, while seven got funded in the second round” she said.

Research from the Center for Responsible Lending backs this up. Their recently released report notes that banks tend to lend to larger businesses with greater payrolls. Even though businesses owned by people of color employ 7.2 million individuals, the report estimates that 95 percent of Black-owned businesses, 91 percent of Latino-owned businesses, 91 percent of Hawaiian- or Pacific Islander-owned businesses, and 75 percent of Asian American-owned businesses may stand little chance of receiving a loan because of these access issues.

Aside from the difficulty of getting a loan, no one knows how long funding will be available. To date, $669 billion has been allocated to SBA loans. That’s 19.11 percent of last year’s federal tax revenue. And with an estimated 70 percent of all small businesses applying for the program, there aren’t nearly enough funds to go around. Data from COVID Loan Tracker suggests that denial rates are as high as 90 percent, but the denial rate is likely higher in rural communities where there are fewer eligible banking institutions. McCargar and Frisch both noted that there was a lack of capital in these communities, even before the crisis. Many business owners have little more than their homes — or if they are lucky, personal savings — to rely on.

This sort of liquidity crisis has significant implications. During the last downturn and subsequent recovery, regions that had greater access to capital were able to reduce the number of layoffs and in turn, preserve the skill of their labor force. Areas that lacked access to financial resources experienced severe wage atrophy and decreased output.

Not surprisingly, it tended to be rural areas that were hardest hit by this  capital disparity. The results are still obvious today. California’s three most rural counties, Alpine, Mariposa, and Trinity, have seen far slower income growth since the Great Recession began, compared to the state’s three most urban counties of Alameda, Orange, and San Francisco. Nationwide, there are 0.2 percent fewer jobs in non-metropolitan areas since 2007, and labor force participation is over 7 points lower than in metropolitan areas.

The last decade’s decline is largely the result of decades worth of underinvestment in any concerted rural economic development strategy. Now, COVID-19 is stress testing the deteriorating financial and economic infrastructure of these communities. Already, they have lost 14 percent of bank branches in the past ten years, 43 percent more than their urban counterparts. Last year, 1 in 4 rural small businesses cited capital access as one of the biggest barriers to successfully running their business. With so many communities yet to recover from the Great Recession, the shock of COVID-19 only hurts that much more.

While the government’s efforts to prop up small business are a step forward from the last recovery efforts, there still needs to be a conscious attempt to address rural-centric financial issues. Not only did communities like Placerville have less capital going into the COVID-19 pandemic, they now face additional barriers to accessing the government programs intended to help them. No plan to help America can work without supporting financial services to our rural neighbors.

For low-income people, that experience isn’t just annoying. It can also be a real financial hardship. Mismatches between available funds and expenses can create a spiral of bank overdraft fees and denied transactions, and the deeper in someone gets, the more insurmountable it can feel.

“It’s very embarrassing,” a commenter told TalkPoverty, describing a day of being hit with three separate overdraft fees while waiting on  processing for a paycheck.

That’s something that could change as early as 2024 with a proposed real-time payments system recently announced by the Federal Reserve, America’s central bank. With FedNow, as it’s being called, funds could be moved any day, any time, nearly instantly.

The move is long overdue and has big implications for people who cannot afford to wait for a transaction to clear, such as the 1.8 million people earning minimum wage or less. A waiter making a tipped minimum wage, for example, can ill afford to deposit a paycheck and wait for it to clear with their rent deadline looming, and the technology already exists to fix the problem.

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Real-time payments are used all over the world to move funds rapidly; they are a type of “faster payments,” which speed the payment process relative to the current standard, but they aren’t just faster. They are, as the name implies, virtually instant.

The United States, though, has remained stuck in the past with an outdated payments system created decades ago that doesn’t operate every day or at all times throughout the day.

In places such as Mexico, the U.K., Japan, Australia, and Turkey, both private firms and central banks own and operate faster payment systems — and in the U.S., a consortium of banks known as the Clearing House operates its own, called, creatively, RTP (for Real-Time Payments). RTP has been rolling out since 2017, and is open to all federally-insured financial institutions. The Clearing House claims RTP is active on 50 percent of direct deposit accounts in America, but the service’s initial customers were the same larger banks that make up the Clearing House.

These account for a large volume of American bank accounts, but a smaller segment of American banks; good for Chase, but perhaps not good for clients, especially since RTP controls pricing and access, potentially to the detriment of some users.

The Fed, building on the work of a task force formed to explore faster payments, wants to leverage its already extensive network of connections with banks, credit unions, and other financial institutions large and small. The goal is not to replace RTP, but to offer another option, and specifically a public one, which offers a net good and adheres to the government’s critical role in promoting fair access, pricing, and opportunity for all.

This is important because while the Clearing House has promised to hold rates steady, there’s no guarantee it will. Smaller banks are concerned about being cut out by what former Independent Community Bankers of America president and CEO Cam Fine described as a “monopoly.” Clearing House’s target date of 2020 for covering all direct deposit accounts in the U.S. is also likely unrealistic, while the Fed’s existing network and reach could make near-universal access much more logistically possible.

Fine notes that the Federal Reserve has been involved in payment processing for over 100 years; this is just another iteration of the central bank’s duties, a sentiment echoed by Chairman Jerome Powell.

Real-time settlement has big implications for businesses, especially small ones. But for low-income people, it could be transformative. Americans spend $24 billion in overdraft fees annually, some of which are driven by issues resolvable via faster payments; if there’s no lag between deposit and funds availability, there’s less likelihood of engaging in a transaction that will overdraw an account. If someone expects to get paid on Friday, the funds are instantly available, and they can pay their rent without worrying about a financial penalty.

People also spend about $7 billion on payday loans, which one in ten Americans have used. Real-time payments can’t wipe out the payday loan industry, but they can take a chunk out of it, since some of those loans are taken out in desperation by people who need money immediately, not after the time it takes for a bank to settle. Similarly, Americans spend approximately $2 billion cashing checks every year. That’s not just people who don’t have bank accounts; it includes people who can’t afford to wait for their accounts to clear.

That’s billions of dollars low-income people can ill-afford going into the pockets of companies with entire families of products built upon exploiting financial vulnerabilities.

Thomas Hoenig, former president of the Federal Reserve in Kansas City, former vice-Chair of the Federal Deposit Insurance Corporation, and currently a senior fellow at the Mercatus Center, notes that FedNow has another potential benefit as the system is built out: It could extend to other financial institutions such as remittance services. Immigrants sending money home through Western Union could therefore benefit from modernization to U.S. payments system, as a faster payments service in the United States can communicate with similar systems overseas, instantly transferring funds from senders to recipients.

Real-time payments will not fix issues like a federal minimum wage that hasn’t increased since 2009, repeated attacks on nutrition programs, and attempts at undermining unions. But they will help low-income people get, and move, their money faster, reducing the strain that comes from living paycheck to paycheck but not actually knowing when the funds in your paycheck will be accessible.

The hacker, Paige Thompson, gained access to personal information such as income, address, and credit scores for seemingly all recent applicants to Capital One credit cards. For secured card applicants, who tend to be low-income, bank account information was compromised as well.

A secured card normally resembles other subprime credit cards — they still report to the credit bureaus, they still charge interest and late fees, and you can still default on the card if you don’t make your payments. But borrowers need to put down a security deposit in order to obtain one, which requires access to the borrower’s bank account information.

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The fact that bank account credentials were compromised raises the stakes for those consumers: even compared to credit card fraud, resolving checking account fraud is no walk in the park, and the costs here will be borne by people who can’t afford to take a hit.

For consumers who don’t think they can get approved for a normal credit card, secured cards can be appealing. And who are those consumers? They don’t have a lot of money: Federal Reserve Bank of Philadelphia researcher Larry Santucci has found that the median income of secured card customers is $35,000, compared to $50,000 for Americans with unsecured credit cards.

Of course, given that these incomes are self-reported, and that credit card companies aren’t required to validate the income of all credit card applicants, this income data is almost certainly overstated: Plenty of people know they can get declined for a credit card for being too poor.

I worked at Capital One for five years, from 2013 to 2018. For a short stint during that time, I was in charge of the secured card product. I know most secured card customers are in no position to absorb a financial shock — and, unfortunately, having your checking account data leaked puts you in a much more dangerous position than a simple breach of your credit card number, or even your Social Security number.

If you apply for a Capital One secured card and get approved, you’ll initially be assigned a $200 credit limit, contingent on you sending in a security deposit of either $49, $99, or $200. The minimum security deposit you have to make depends on your risk as an applicant.

Think about that for a second: People are putting down a $200 deposit, to get a $200 credit limit, and the product makes money because people then borrow against their own deposit at a 26.99 percent interest rate — one of the highest in the industry — and get hit with late fees up to $39 when they fail to make payments on time. Santucci has found that only one in four secured card customers pays their credit card bill in full every month.

Some secured card customers are “new-to-credit,” but major banks such as Bank of America, Wells Fargo, and Discover have all been known to give out credit cards, at least with small credit limits, to people without credit history. If you’re new-to-credit but you have a checking account, and you also realize that your odds of being approved for an unsecured credit card are pretty high if you walk into a branch of your bank (of course, not everyone realizes this), you’re not likely to find a secured card attractive.

More commonly, secured card customers have low credit scores – the typical customer’s FICO is in the 500s — an obvious indication that they’ve struggled in the past to pay bills and to make ends meet. This condition can be temporary —your credit score might still be low even though your finances have recovered, since missed payments lower your credit score for seven years — but many Americans who struggle financially never achieve the stability they’d need to keep a high credit score. In a country where plenty of people live paycheck-to-paycheck, but only a third have subprime credit scores, secured card holders and applicants tend to be under real financial distress.

Because secured card applicants have to put down a security deposit, they’re not approved until they give Capital One checking or savings account information and their deposit is sent, unlike users of unsecured cards. This is what puts Capital One’s secured card holders at greatest risk after the breach.

To see why, it’s helpful to take a second to think about the exact ways in which a data breach comes back to bite consumers — especially given that you’re usually not on the hook for purchases fraudulently made in your name, whether someone has stolen your credit or debit card, or opened up an account using your identity.

Lose your credit card number, as in the Target or Home Depot breach, and you can usually resolve things with quick phone call to your bank if a fraudster makes purchases on your card. Lose your Social Security number and address, like in the Equifax breach, and someone can open up new accounts in your name, or take over your existing accounts by calling the bank, pretending to be you, and changing the contact information. Proving someone else did this can be anywhere from moderately to extremely time-consuming depending on your circumstances: it took reporter Phil McKenna a few days to clear things up, a typical amount of time for garden-variety identity theft, where you’re usually out time but not money.

But let’s consider what it will look like if someone uses the checking account information from a Capital One secured card customer to commit ACH (Automated Clearing House) fraud – using the customer’s checking account routing numbers and account numbers to set up unauthorized withdrawals, write counterfeit checks, or even pay off the fraudster’s own credit card.

If you’re a Capital One secured card customer, your checking account could be emptied. If you don’t notice what happened, you might try to make purchases and get hit with overdraft fees expecting money to be available that’s gone. Odds are very high you’re living paycheck to paycheck. Your Capital One secured card may have a limit as low as $200, and, across the industry, the typical secured card customer has only one credit card. If that happens, how are you supposed to buy groceries, bus fare, or diapers?

What’s known as Regulation E requires the bank credit your account within 10 days of when you notify them about fraud, unless further investigation is needed: a Capital One spokesperson told me they try to resolve most cases well under that limit, and said they refund any overdraft fees they determined occurred because of the fraud, whether it was the fraudulent transaction or a subsequent legitimate transaction took the account to a below $0 balance.

Everything depends on how quickly the customer notices something was wrong, how comfortable she is advocating for herself, and how equipped she is to go up to 10 days with nothing in the bank. Nearly 40 percent of Americans couldn’t cover a $400 emergency expense without borrowing money, even without having their checking account drained unexpectedly by fraud, and the typical secured card customer has no other credit cards.

Now, it’s completely possible that no actual fraud will occur as a result of the Capital One breach: in a statement, Capital One said that, based on the analysis they’ve done so far, they consider it “unlikely that the information was used for fraud or disseminated by this individual.” If they’re wrong, the consequences for secured card customers will be severe.

In this moment of crisis, it’s worth taking a step back to ask a broader question: are secured cards more helpful or more harmful to the low-credit score consumers they’re designed to serve? These products are often touted as a way to help people improve their credit scores, but there is weak evidence that they work for the typical customer. Santucci’s research shows that the median customer with a secured card sees only a 11-point increase in their FICO after two years, a number that’s dragged down by the 20 percent of customers who close or default on their cards within 24 months. 11 points is not a particularly impressive increase, especially given that if you wait and do nothing other than paying any existing bills on time, your low credit score typically goes up on its own as negative information on your credit report ages off.

Banks can tout that secured cards are free for customers who pay their bills in full every month, but the three-quarters of customers who carry a revolving balance are paying a high price for the privilege of borrowing against their own money, and would arguably be better off using their security deposit as an emergency fund. I’m sympathetic to what can feel like a double-bind to the banks: given that you need to charge higher prices to low-income customers to break even, is it better to be accused of ignoring them, or is better to be accused of exploiting them? If companies like Capital One can’t find better ways of serving low-income Americans, it won’t just be a breach of data: it will a breach of trust.

But when my manager was giving me paperwork and collecting my forms of identification, I realized this job would be yet another situation where not having a bank account would be a problem.

Tedeschi Food Shops didn’t offer paper checks as a form of my payment, like my other jobs tutoring and grooming dogs had. There were two options: Sign up for direct deposit with a bank account, or have your paycheck put on a payroll debit card, which would charge me a fee of around $5 for every ATM transaction. The use of payroll cards is on the rise, particularly among freelancers and independent contractors. In 2016, 8.7 million people received payroll cards, compared to just 5.5 million employees receiving paper checks.

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I was part of the 8.4 million households who are unbanked in the U.S. as of 2017, according to a Federal Deposit Insurance Corporation survey. I didn’t have an account because of former credit and account issues, like 14 percent of unbanked people; when I was 17, my dad and I purposefully overdrew my bank account by about $400 to cover basic necessities when he lost his job for a few months. We both thought we’d be able to pay it back fairly quickly, but we couldn’t, and my account closed.

People who are unbanked (or underbanked, meaning they have some access to financial services, but not everything they need) spend an average of 10 percent of their annual income just to access basic services like check cashing or credit. I had so little already, with barely any cash saved and an hourly job that paid Massachusetts minimum wage ($8 per hour at the time). I couldn’t afford to lose a portion of my paychecks to ATM fees.

Instead, I built up the nerve to talk to my girlfriend of four years and ask her if she’d let me use her bank account to get paid.

Like many people who grow up poor, my relationship to money impacted all my other relationships. I didn’t want to be financially dependent on my girlfriend. I wanted us to be able to make the decision to share our finances someday when we lived together and both felt we were ready. But I also didn’t have many other options; my dad had been without a bank account for longer than I had, and he was my main support system after my mom passed away.

My girlfriend said yes, and I put her account details down on my direct deposit form. I started picturing how I would feel when I got the money out of the ATM after being paid the following week. It was more money and more hours than I’d made at my on-campus tutoring job. I just wished that finances didn’t have to complicate my relationship all the time. I wanted to save up to take my girlfriend to Provincetown for her birthday that summer, but I didn’t want to share every single detail of my financial situation with her yet.

Sharing a bank account required an immense level of trust. I was putting all the money I was making into her account and relying on her to take it out of the ATM and give it to me. She had access to find out exactly how much I was making per paycheck and if I decided to make an online purchase with her permission, she could see every detail in her account statement.

It made me feel extremely vulnerable. I scrutinized a lot of my own purchases — would buying this make me seem irresponsible? Then I scrutinized my relationship — what if she no longer wanted to be in a relationship because she realized what a burden it was to date someone who was poor? What if I never climbed out of poverty like I hoped I would after college, and I had to rely on her and her bank account for the rest of our lives?

And then, a few weeks after I started at Tedeschi, my girlfriend also got a job there. We both needed summer jobs to save between our junior and senior years of college, and it was the perfect fit for her, within walking distance of her house. The day she went in for her training, she got frustrating news: Because her bank account was already attached to my direct deposit, she couldn’t get paid the same way. She had to use a payroll debit card and lose the $5 every time she took her paycheck out of the ATM. We talked about seeing if I could switch and let her use her own account to get paid, but she said it seemed like more trouble than it was worth.

She was essentially being punished for doing me a favor.

All relationships have their challenges, but I felt the strain of our socioeconomic differences. There was a power dynamic underlying every interaction. I felt like I had to be the “perfect” poor person: I couldn’t make any reckless decisions, couldn’t spend my income on anything frivolous, had to work as hard as humanly possible to get over the poverty line. My girlfriend never made me feel lesser because my family had less money, but I felt it all the same.

When you’re poor, all your relationships are strained by your lack of money. I’d felt it in moments where my best friend had to drive me to Walmart when my dad and I didn’t have a car so I could get school supplies. Or when my friend printed my high school papers for me because we didn’t have a printer. When I had to turn down opportunities to go out with my friends because I knew I couldn’t afford dinner and a movie. When all my friends had brand new decked-out dorm rooms and mine was decorated in hand-me-downs and DIY collages I made for less than $10.

At the end of that summer, my girlfriend and I took our trip to Provincetown. We both took work off for the long weekend and headed out in my green Buick. The hotel I’d booked as a birthday gift to her was one of the cheapest I could find that was three stars or more, and it was squarely in between all the things we wanted to do on our trip.

On our way to the hotel, we stopped at a bank branch to deposit some money into my girlfriend’s account to use during our trip. A bank associate asked me if I wanted to open my own account. I told her I thought I wouldn’t be able to because of past account issues and she encouraged me to apply anyway.

After 15 minutes, I learned I was approved. It could have been because I’d been building credit with a Discover credit card for several months, because I paid my Sprint phone bill on time, or because I’d been under 18 when I overdrew my checking account. I wasn’t sure but didn’t question why the bank was allowing me to open a new account; I’d rarely had good fortune when it came to finances and I didn’t want to jinx what was a step in the right direction. After four years, I was able to open my own account again. I could buy gifts online for my girlfriend as a surprise without worrying she’d see the cost on her statement. I could make financial decisions that were visible only to me without worrying how they might impact someone else’s life.

I could have control over my own money: How I kept it, how I spent it, where it went.