5.4% of American families, according to a Federal Deposit Insurance Corporation report from 2019, don’t have a bank account. The percentage doesn’t seem to be that high. With 325+ million people living there, that amounts to 7.1 million homes that lack access to banking services. These families lack basic bank accounts for a variety of reasons. Some people believe they lack the resources to open and finance an account. Others fear having lousy credit or distrust banks (and their fees).
However, going bank less has the drawback of being quite expensive. Here are a few ways that adopting banking alternatives could cost you money.
Paying for check cashing is Exorbitant
Your entire paycheck should be yours when you receive it. And if you have a bank account, that is unquestionably the case. Deposit or cash your cheque at no cost through your bank. Not if you require the services of a check cashing service. We previously looked into the best ways to cash a check without a bank account. The options are all pricey.
These services charge a percentage of the check’s overall value to cash a check. These proportions change from one state to the next. However, you can find yourself having to pay up to 5% of your hard-earned money (in Florida and Maine) to be able to use it. Yikes! You may spend less on monthly bank account fees.
You Must Pay Money Order Charges
A money order hasn’t been around for a while. That’s because using a checking account to pay rent, mortgage, or utilities is reasonably straightforward. A paper check can still be written and mailed. Alternatively, set up online bill payments with your bank. You will need to pay cash for a money order if you don’t have a checking account.
The costs are typically $1.15 for money orders up to $500 or $1.55 for money orders between $500 and $1,000. Although it’s not a large sum, money orders can only be used for up to $1,000. The cost of paying any larger bills, such as your rent, will thus be two or more fees.
Not even the additional bother of obtaining a money order is mentioned. You can make a cheque or online payment at the convenience of your home. You must go to a USPS or Western Union office to obtain a money order (or similar service). After waiting in line, you’ll have to reconcile the balances with the cashier. These factors make it more challenging to pay your payments on time.
This is particularly annoying, given that we are still experiencing the pandemic. You have to wait in long lines, which results in longer wait times, and close closeness to other people. That is not advised at this time. Just open a bank account to save yourself the hassle, free time, extra costs, and perhaps even your health.
Most Likely, a Prepaid Card Will Be Used (And Pay More Fees)
Prepaid cards could be smart if you don’t like carrying large amounts of cash with you. They are expensive, though. Essentially, you are paying 1% to 5% of the money you load onto the card. If you need to withdraw the money again, there are ATM fees (on top of the bank’s out-of-network fees). In some circumstances, you will need to pay monthly maintenance costs (often if you don’t spend the money soon enough). Furthermore, losing the card is not the same as losing a debit card that may be replaced.
Lastly, some individuals don’t seem to understand how to use up every last penny on a prepaid card. When the balance is low, this frequently results in wasting the remaining few bucks. Yes, it only costs a few dollars. But those dollars add up if you do that frequently enough.
Random advice: I usually suggest folks transfer the exact amount from their prepaid card balance to their Amazon account when it runs low. Almost everyone purchases something from Amazon.com. This advice, however, is scarcely applicable if you don’t have a bank account because it’s doubtful that you will be shopping online without one.
Utilizing them at grocery stores is one option. Swipe the card with the lowest balance, and it will make all possible deductions from that card first. The remaining sum will need to be paid using a different payment method. Try Costco as well; I believe they allow multiple card usage. Or open a bank account, I guess.
Your Options For Credit Cards Are Extremely Limited
Most credit cards demand that the applicant have a bank account. But some do let you apply without one. Even yet, the most significant credit cards—those with the best cash-back benefits or lowest APRs—require a bank account. You won’t even be aware that those cards are available if you don’t have a bank account.
Without A Bank Account, You Aren’t Saving Anything
You aren’t saving when you are compelled to hold onto cash (or put everything on a prepaid card). Forget about the interest. Since there is nowhere you can safely store cash, you aren’t even considering saving money. And no, keeping extra cash under your mattress is not a secure way to save money.
Your instinct will be to discover methods to spend all of your income if you continue this pattern. You will still spend that money each pay period, even if you don’t need it. You don’t have anywhere else to store it, after all. You are forced to live paycheck to paycheck if you don’t have a bank account. A catastrophe is just waiting to happen.
The Conclusion
Even though the banking sector might occasionally be irritating, it remains the most excellent alternative for managing finances. Avoid getting personal. A bank is a company. They are attempting to generate money. As long as you understand the guidelines for when they will charge you, they genuinely offer a ton of services gratis. If you handle it well, you may be taking advantage of the system and abusing it.
On the other side, not having a bank account makes you far more susceptible to charges. It simply doesn’t make sense not to have a bank and still get nickel and dimed elsewhere if you avoid banks because you detest how they nickel and dime you. How much money do you lose by opposing banks on a philosophical level?
I’m not here to direct your actions. Financially speaking, though, ignoring bank accounts is foolish. You pay more and keep less money if you don’t have a bank account. That is assured.
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