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Are You Unbanked? Here is What to do About it.

unbanked

Most Americans have access to a bank account, directly depositing their paychecks each month and digitally paying their bills from it. But not every adult has that advantage.

According to the Federal Deposit Insurance Corporation report, or FDIC, about 7.1 million U.S. households are unbanked. These are individuals with no access to a checking or savings account at a bank or credit union.

In some cases, consumers simply don’t have the funds to set up a bank account. In other cases, the distrust of banks, concerns about bank fees, problems with previous bank accounts, or the inability to provide the right identification to open an account are holding them back, according to the report.

But without an official account, consumers are missing out on so much. They can have trouble getting loans because some lenders or creditors require a bank account as part of the application. To cash a check, the unbanked may be forced to go to a check-cashing service, which usually charges a fee.

Paying bills is more difficult, requiring people to pay in person with cash. Others use a money order to make sure the lights stay on or the rent gets paid. And their money isn’t protected. When cash is tucked away at home, it could be misplaced or stolen.

For the unbanked, without the benefit of a steady income or the means to travel to a bank, it can feel like there are few options. But there are. Here’s what the unbanked can do to shore up their money management.

Get a Bank On-certified account

Cities for Financial Empowerment Fund, a national nonprofit, created Back On accounts in partnership with more than 40 financial institutions across the country. They feature low costs, no overdraft fees, debit, prepaid cards, and online bill pay. The goal is to provide an easy and affordable way for the unbanked to be part of the mainstream banking system. The Bank On website offers a state-by-state list of banks where the accounts are available.

Find a second chance checking account

If you have a history of bounced checks or fees that went unpaid, it can be difficult to open a new account. Forbes article reports, when your account is shut down because of a bad track record, ChexSystems can put you on a list of high-risk bank customers. You can be on this list for up to five years, but you’re not out of luck. Second chance checking accounts provide an alternative. They are similar to a typical account but come with some extra restrictions. Forbes describes them as probationary accounts. These accounts provide an opportunity for people to restore their banking history. Wells Fargo, Radius Bank, and Chime are among the financial institutions that offer second chance accounts.

Consider a secured credit card

To open a secured credit card, you’ll need to put down a deposit, usually starting at around $200. That deposit will serve as collateral if you end up missing payments. If you close the card and pay off the balance the money is returned to you. According to Investopedia, it’s important to be cautious with these cards. The annual percentage rate can be high, hovering around 20%. However, they can provide an option for people who are working to rebuild their finances.

Check-in with local banks, credit unions

Some local banks and credit unions are willing to work with the unbanked to help them shore up their finances and better manage their money. Inclusiv, for example, is a network of credit unions across the country that serve low-income communities. Self-Help Federal Credit Union offers basic and affordable banking services in North Carolina, South Carolina, California, Illinois, Florida, Washington, and Wisconsin.

Consider a neobank

Neobanks are digital operations with no physical bank branches. As The Capital describes them, they offer the usual trappings of a bank account. This includes the ability to deposit money and pay for items. They often come with no fees and can be designed to help the underserved. CapWay is one example. Launched by a woman who grew up in a small town with few banking options, it boasts no monthly fees, overdraft fees, or minimum balance fees. The Capital has a list of dozens more.

For the unbanked, it may seem easiest to keep squirreling away cash in that shoebox in your closet or avoiding the fees that might come with a formal bank account. But remember this: Once you tally up the cost to cash checks and pay bills, not having a bank account can be much more costly than having one.

According to a NerdWallet study, a person with a bank account pays about $35 a year for a checking account and money orders. The unbanked annually spend nearly $200 on check cashing services and money orders. Bottom line, there are options for those ready to get their finances in order and launch on a path toward better financial health.

The team at CESI is committed to helping you make wise financial decisions and to helping you understand how to get out and stay out of debt.  For a free debt analysis, contact us and find out how we can help.


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