Unless you’ve experienced poverty first-hand, it’s difficult to imagine just how expensive it can be.

Low-income Americans make up the majority of the country’s 34 million underbanked households, a group that is often forced to rely on high-cost alternative banking products when they’re feeling financially squeezed.

Just ask Melissa and Alex Kimmel. The Scituate, Rhode Island, couple is featured in a new documentary called “Spent: Looking for Change,” sponsored by American Express (AXP), which follows a handful of families struggling to cope outside of the traditional banking system.

A no-credit lifestyle

When the Kimmels married in 2000, they made the conscious decision to live a debt-free life. They paid for their wedding in cash, got rid of their credit cards and committed to a cash-only lifestyle.

“Both of us have had credit before and experienced getting in over our heads,” Melissa, 44, says. “We thought we were being responsible not having any credit, because we had a lot of friends we were seeing who were getting deep into debt.”

When Alex, a musician and recording technician, was diagnosed with Multiple Sclerosis and had to leave his job in 2009, Melissa, an executive assistant at Brown University, became the primary breadwinner for their family. On a salary of less than $40,000 a year, she was suddenly financially responsible for a family of four, including two young sons, one of whom, Jonah, 13, is autistic and requires expensive care.

As the bills stacked up, the couple began overdrafting their bank account on a regular basis, getting slapped with as much as $35 in fees each time. Without a credit history (they rent their home), they had trouble qualifying for new lines of credit. A secured credit card would have helped them boost their credit over time, but their credit union required them to come up with $500 to open one — a lump sum they couldn’t afford.

View photos Because of fees, the Kimmels spent $1,700 trying to pay off a $450 payday loan. (Photo: Spent: Looking for Change) More

As a result, when they needed $450 to pay for a special developmental test needed to place Jonah in a school for kids with his needs (a test that was not covered by insurance), they went to the only place that wouldn’t turn them down for their lack of credit history — a payday lender.

Americans spend an estimated $7.4 billion every year on payday loans, a highly controversial form of credit that is doled out on the condition that the borrower will pay it back when they get their next paycheck. Given the fact that the majority of people using payday loans already live paycheck to paycheck, it’s often difficult to pay loans on time.

When that happens, payday lenders generally offer an option to “reloan” them the money. The borrower pays a fee – $50, in the Kimmels’ case — and gets another two weeks to pay back their loan. If they can’t pay the next time, then they pay a fee for another reloan – and so the cycle goes on. Four out of five payday loans are rolled over within 14 days, and more than half of payday loan borrowers wind up paying more in fees than their original loan balance, according to the Consumer Financial Protection Bureau. On top of that, interest rates on these loans can be up to 35 times as much as credit cards.

Over the course of three years, the Kimmels spent $1,700 in fees on their original $450 loan.

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