There are many reasons that some people don’t have bank accounts, from a lack of income to the very reasonable desire to avoid bank fees. For many people, lacking a bank account is a temporary condition due to changing work circumstances. Whatever the reason, if you handle your finances without a bank account then you’re among the millions of “unbanked” Americans.
More than 7 million households were unbanked in 2019. For us here in the Midwest, that translates to about one in twenty families that manage their finances through cash transactions and other alternatives to savings and checking accounts. Nowadays, many people prefer alternative financial services such as check cashing and payday lending – and those options are growing.
Why People Avoid Banking
Why not just use traditional financial services like savings accounts, credit cards, or personal checks? It depends on your perspective. Some newer residents in the country might be unfamiliar with our banking system. Others distrust banks or prefer not to search for the right branch just to stand in line.
But the biggest reason people opt out of traditional banking is to avoid paying overdraft fees. They’re not wrong to worry. Banks made over $11 billion from overdraft fees and insufficient fund penalties in 2016. Their fees and rules can pose a real hurdle to people considering opening an account. Here are some common barriers to banking:
- Minimum balances
- High account fees
- Unexpected fees
- Overdraft penalties
- Penalties for bounced checks
Another potential reason is to avoid a cycle of debt through bank loans or credit cards that can lead to more money problems later on.
Other Financial Options
While banks have their advantages, there are many kinds of financial services that fill in the gaps for folks living check to check. People used to pay most of their bills by mail using checks from a traditional checking account. Now alternatives such as electronic utility bill payments make this unnecessary.
Here are four services that will help you meet your financial needs without a traditional bank account:
Online Banking: As long as you don’t get paid in cash, you can often get better interest rates at an online-only bank. Just make sure they won’t charge you fees for using the ATM.
Prepaid Debit Card: These are a safe alternative to a regular debit card. You just load your prepaid debit card with any amount you need in advance and you can use it to make purchases. The South Suburban Currency Exchange’s “Green Dot” prepaid debit card can help protect you against identity theft and build credit at the same time.
Check Cashing: Check cashing services provide an alternative way to cash your check hassle free. The SSCE can cash all types of checks, from business and insurance checks to tax refunds. Just stop by with your checks and an appropriate state ID, and you can walk out with your cash in hand.
Money Order: This service provides you with the safest and easiest way to send cash. At SSCE locations, money orders are valid for up to five years. The funds are a guaranteed form of payment. Under most circumstances, if a Currency Exchange money order is lost or stolen it can be replaced.
There are also “second-chance” checking accounts available to people who have been barred from opening accounts in the past. The bottom line is, if you need to make any sort of financial transaction, there is probably more than one way to get it done.
Federal Government’s Money Smart Program
Most of the unbanked population in the US did have formal bank accounts at one time. Governments and other organizations have created programs intended to get more people on board with banks. One such program is the FDIC’s Money Smart Program, a 20-year-old initiative aimed at helping people of all ages enhance their financial skills. The idea is that by educating the public about personal finances, more people will open accounts and develop positive banking experiences.
How SSCE Serves the Unbanked
At SSCE, any of our professionals can help you address all your financial needs. We can walk you through the many alternatives available to you if you lack a bank account. We provide over fifteen different financial services from four convenient south suburban locations, including just about any car-related financial service.
If you don’t have a bank account and need help figuring out what options are right for you, give us a call or go online to find the nearest SSCE location.