The True Cost of Not Having a Bank Account
Editor’s note: This is a guest post by Daniela Baker, the editor of CreditDonkey.Com. CreditDonkey is a personal finance blog.
A new survey by the Federal Deposit Insurance Corporation has found that about one in thirteen Americans does not have a checking or savings account. The survey found that over a quarter—24.6 percent—of all American households either don’t have a checking or savings account or do have one but still choose to utilize such alternative financing options as check cashing businesses, “payday loans” brokers and pawn shops.
A disproportionate number of such “unbanked” households are comprised of low-income and minority populations. For example, approximately 22 percent of black households don’t have either a savings or checking account. In contrast, only about 3.3 percent of white households don’t have a bank account. Older people and baby boomers are more likely to have bank accounts as were those with at least a bachelor’s level education.
Many lower-income people are put off by the fees charged by most of the major banks for low balances, along with fees attached to ATM transactions. However, there are now many banks, such as Capital One, that cater to lower-income households and don’t place fees on minimal balances or charge for ATM transactions.
In effect, the true cost of not having a bank account lies in your forfeiture of the many benefits that such an account provides. Some of these benefits are listed below
Benefits of Having a Bank Account
Convenience: By opening a bank account you will be issued an ATM or debit card, along with a checkbook. By placing all of your money into a savings and/or checking account, you will be able to use your ATM card to make purchases at the majority of retailers throughout the country. A debit card will also allow you to make online purchases without having to deal with the time-consuming process of getting a money order of bank check. A final benefit is that with an ATM card, you will be able to withdraw money at any ATM machine. Keep in mind that the fee will be anywhere from one to five dollars, if you use the ATM of bank other than your own or one of those privately-owned ATMs often associated with delis or fast-food establishments.
Bank accounts provide security. Right along with convenience, debit cards offer a good measure of security for your money. Your account will be protected with a four digit password code, known as a personal identification number (PIN).
If you were to lose your debit card, your bank will put a freeze on its use to prevent fraudulent transactions and issue you a new card (with a different account number) at no charge. You can also consider using credit cards, as they tend to offer more security and liability protection from unauthorized charges compared to debit cards.
Ability to Track Spending. When you have a bank account, you will receive monthly statements listing all of your transactions during the past month. Having this record allows you to keep track of your spending. As an added note, you will also be able to sign-up for online banking and receive these statements via email. Access to your online account will also be password protected and it is recommended that you use a different PIN that you use for your ATM card.
Earn Interest. By maintaining a savings account you will be able to earn variable interest on your balance. In addition, many banks will cash your paycheck free of charge but be sure to ask about this before opening the account. As an alternative you may choose to deposit your checks directly via the ATM thereby avoiding long bank lines. Having a bank account also gives you the option to select direct deposit payments from your employer and have your pay check deposited directly into your bank account.
Loan Qualification. If you have an account with a given bank they are more likely to qualify you for a loan since most banks prefer to lend to existing customers. In addition, when lenders are reviewing your ability to pay back the loan, having an existing account with a healthy balance will significantly improve your chances of being approved.
Daniela Baker from CreditDonkey, a credit card deals website, says why pay the financial costs of being among the “unbanked” when there are endless benefits to having an account. And the process is easy. Start by researching banks that offer no fee or very limited fees for lower balances and ATM transactions and join the billions of people the world over who reap the financial rewards that banking provides.
