There are nearly 17 million adults in the U.S. who are, according to the FDIC, “unbanked.” But if you ask me, it sounds like most of them have been good and roundly “banked,” as in, “Dude, those guys completely banked you off.”
The term “unbanked” is used to describe people, mostly in the low-income brackets, who avoid the formal financial system, turning instead to check-cashing joints, neighborhood liquor stores and prepaid debit cards. This is understandable when you understand that the modern U.S. financial system is a finely honed extraction industry that treats poor people much like coal companies treat the mountaintops of West Virginia: Just dig out what you want and to heck with anyone you hurt along the way.
Many of the unbanked have been on the receiving end of good old-fashioned banking in the form of surprise fees and intentionally created overdrafts bankers use to strip-mine money directly from their accounts. In response, about a third of unbanked consumers use prepaid debit cards to receive paychecks, pay bills and get cash at ATMs.
That’s how he bank-rolls
Customers of music mogul Russell Simmons’ RushCard couldn’t get any of their money from Oct. 12 to as late as Monday, when Simmons claimed all “major functionality” was restored. But RushCard holders told me as late as Thursday that they still couldn’t access their cash. Simmons also vowed to set up a “multimillion-dollar” fund to reimburse customers for late fees and other costs, but didn’t give details.
In the meantime, consumers who just got bank-timized by RushCard should find other options for handling their money that doesn’t rely on the good graces of a rap star.
Other cards: For those who really don’t trust banks or can’t open a new account, a better prepaid card could be the simplest solution. RushCard has been criticized for its fees, and choices such as the American Express Serve or Bluebird cards, as well as the BB&T MoneyAccount card, the Chase Liquid card and the Comerica Bank Convenience Card or Independence Prepaid Card all get good ratings from Bankrate.com and Nerdwallet.com. Check those sites, as well as CreditCards.com, for prepaid options.
Credit unions: Another option is a local credit union, especially those that work with consumers who’ve had financial issues or need help in managing their money.
“We sort of gear ourselves to work with low-income people because we have an awful lot of them as members,” says Hank Hubbard, CEO of One Detroit Credit Union, formerly known as CACU Credit Union.
At the Public Service Credit Union, a $50 balance is all it takes to get monthly maintenance fees waved, says CEO Dean Trudeau.
Public Service focuses on the unbanked by putting a branch in the headquarters of Focus: HOPE, the nonprofit training organization, and provides lunch at some of its money management seminars.
“There are a lot of credit unions in neighborhoods that banks don’t want to go into, and credit unions are much more friendly to your needs than party stores,” Trudeau says. “When we get a member in, we are doing a lot to make them more financially savvy.”
“Checkless” checking: Some big banks that have been the worst offenders when it comes to intentionally bank-boozling customers also offer alternatives, partly because they’ve been stung with criticism (and multimillion-dollar criminal fines). This puts me in the bizarre situation of writing something nice about Bank of America, so watch out if I get a little woozy here.
“Some of the banks are now offering what they call ‘checkless checking accounts’ that are structured similarly to a prepaid card,” says Susan Weinstock, director of consumer banking project for the Pew Charitable Trusts.
Pew helped banks design the accounts, which don’t offer checks and don’t allow overdrafts. The bill-paying feature immediately removes the money from the account, so you can’t lose track of a pending check. In-network ATM withdrawals and point-of-sale transactions are free and, if you don’t have enough cash, the transaction is declined, at no charge. The monthly service charge is $4.95. It’s the Safe Balance Account at BofA, and the Hassle-Free Account at KeyBank.
“With this account,” says Weinstock, “you will never overdraft and you will never pay an overdraft fee.”
(Whoa, I’m a little light-headed at the idea of Bank of America creating an account where it can’t totally bank-wink customers. Feeling weak. Must ... sit ... down ... )
They’re just all banked out
OK, I’m recovered, and let me point out to all the superior-feeling folks out there who are going to preen about never bouncing a check that you’ve either been lucky, obsessed or blessed with very simple finances.
But when scummy bankers set out to bank-around their customers by purposely engineering extra overdrafts, bounced checks are guaranteed, especially since overdrafts and fees became a major source of bank profits.
So I don’t criticize anyone who’s been banked up against the wall for turning to a RushCard, a check-cashing joint or burying their cash in a Mason jar.
But all those alternatives have their own risks and costs. It’s better to invest some time in learning how to manage your money, explore some old and new alternatives, and find an institution that doesn’t go out of its way to make “bank” a four-letter word.