Despite the advantages that we discussed on the previous page, working with a bank can be a huge pain. If you aren't careful and you accidentally overdraw from your checking account, the bank might slap you with a nonsufficient funds fee for a bounced check or an overdraft protection fee for paying the check with its funds. Or, it may transfer the necessary funds over from your savings account and charge a fee. Banks profit from all these fees and have been quietly raising them over the years [source: Tse]. Also, in spite of its convenience, things could get ugly if someone steals your debit card or card number. Unlike a credit card, fraudulent charges to a debit card are difficult to resolve.
These frustrations, along with general distrust of banks, discourage many people. Some 8.7 percent of families in the U.S. choose to wash their hands of banks and keep their cash [source: Aversa]. It's not always easy, but living without a bank account is quite possible.
For those of us who've always taken using a bank for granted, let's take a look at the alternatives. For one, you can always go old school and carry cash around with you for things like groceries and gas. Carrying cash doesn't have to be as bad as some credit card commercials portray, but be careful -- exposing a wallet bursting at the seams with cash can make you a target for muggers.
Most agree that it's not safe to send cash in the mail. Not only can it get lost or stolen, but the recipient can pocket the cash and then claim he never received it. Instead, you can purchase a money order at a post office, grocery store, gas station or check cashing center. To buy a money order, you must pay the face value and a small fee, and you get a piece of paper that looks like a check. You write the recipient's information and your information on the money order then mail it or take it to whomever you want to pay. You keep the receipt in case the money order gets lost and you need to see if and by whom it was cashed. You can also send money and pay bills via wire transfer from services like Western Union.
At a check cashing center, you can cash checks without a bank account. However, you'll pay a fee -- usually a percentage of the check amount. Or, you can cash a check at the bank that's listed on the front of the check. Some banks charge a fee to cash a check if you don't have an account with them, but the bank's fee can be lower than those at check cashing centers [source: AARP].
Borrowing money is harder -- but not impossible -- without a bank account. Some lenders will offer small loans to those without bank accounts. Be prepared to pay higher interest rates and fees [source: NYC.gov]. To get the convenience of a credit card, you can buy a prepaid debit card, which requires no bank account [source: Western Union].
To bank or not to bank? This doesn't have to be the question. It isn't an all-or-nothing situation. You can choose to keep just some of your funds in a bank account. Meanwhile, you can either stuff the rest under your mattress or do what many financial advisors recommend -- invest in things like bonds or stocks.
Investigate the links below to find more information on banking and related topics.
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More Great Links
- AARP. "Before You Enter a Check Cashing Store." AARP.org. (July 11, 2008) http://www.aarp.org/money/credit_debt/a2002-10-04-CreditDebtFringeBanks.html
- Aversa, Jeanine. "Many in U.S. don't have bank accounts." USA Today. June 23, 2007. http://www.usatoday.com/money/economy/2007-06-23-2355646919_x.htm
- NYC.gov. "Fees When You Don't Have a Bank Account." NYC Department of Consumer Affairs. (July 11, 2008) http://www.nyc.gov/html/ofe/html/save/fees_dont.shtml
- Tse, Tomoeh Murakami. "Banking Fees Are Rising And Often Undisclosed." The Washington Post. March 2, 2008. (July 11, 2008) http://www.washingtonpost.com/wp-dyn/content/article/2008/03/01/AR2008030100189.html
- Western Union. "Western Union Prepaid Visa Card." Western Union. (July 11, 2008) http://www.westernunion.com/WUCOMWEB/staticMid.do?method=load&pagename=osPrepaidMC