Buzz
For most people, safeguarding their finances means having at least a checking and a savings account. Yet, many Americans operate without any bank accounts. Beyond the challenges of high fees or limited credit history, the reasons for staying 'unbanked' often include concerns over privacy or a general mistrust of financial institutions.
In a world where full access to traditional banking is the norm, living without a bank account becomes not just inconvenient but financially burdensome. Here’s what you need to understand about the unbanked lifestyle and the costs it incurs.
What does it truly mean to be 'unbanked'?
Being 'unbanked' refers to individuals or households that don't have a checking or savings account at a bank or credit union. As of a 2021 survey by the Federal Deposit Insurance Corp., about 4.5% of U.S. households are considered unbanked. People in this situation use alternative methods to handle their finances, such as prepaid credit cards, online payment services like PayPal and Venmo, nonbank money orders or check-cashing services, and cash.
Why would anyone choose to live without a bank account? It’s often not by choice. The survey indicates that many unbanked individuals lack the funds to meet minimum balance requirements or can’t afford account-opening fees. Others choose to stay away from banks due to mistrust of financial institutions or concerns about privacy. If you identify with this, it's important to consider the hidden costs associated with living without traditional banking services.
Weighing the Costs of Living Without a Bank Account
While trying to avoid bank-related fees, unbanked individuals face significant costs in other areas. For example, they often need to pay steep fees for basic financial services, such as check cashing and purchasing money orders.
Another major expense of being unbanked: the lack of access to credit. Non-bank credit options, such as buy here, pay here (BHPH) and payday loans, come with exorbitantly high interest rates. Living without a bank means missing out on the primary way to build credit, which can affect your ability to secure loans, rent an apartment, and more.
When discussing trust, it’s essential to note that virtually all banks are protected by the Federal Deposit Insurance Corporation (FDIC), ensuring your funds are secure, up to $250,000. Credit unions, on the other hand, are safeguarded by the National Credit Union Administration (NCUA). You can find the FDIC logo at bank teller windows or entrance doors, or visit the FDIC’s bank suite to view a list of FDIC-insured institutions.
If traditional big banks aren't your choice, don’t worry—there are plenty of other financial institutions available. Consider exploring digital banks or local community banks that can assist you in setting up an account.
In the end, the financial burdens of living without a bank account often surpass the costs associated with maintaining one. Here’s a beginner’s guide to help you navigate the various types of bank accounts available to you.
