According to the FDIC, 7.0 percent of households or 9 million households were unbanked in 2015. This can result in a tremendous cost. Unbanked individuals will spend over $40,000 in their lifetime cashing checks. There are various reasons why people are unbanked. A few reasons why there are unbanked individuals is that some choose not to use a checking or savings account, opting to use a cash base system only; others have credit too low to qualify for a checking account; and, many think they do not have enough money to open an account. Or, some are unbanked due to the nefarious actions of someone else.
The reprehensible actions of another individual are what caused me to become unbanked in my early 20’s. In the late 1980’s stealing a person’s entire identity not as easy as it is today; however, a motivated person could wreak havoc on another person’s finances. While working as a waitress at a restaurant, a co-worker stole my purse. She wrote over $600 in checks for clothes, manicure’s, getting her hair done, etc., overdrawing my account. I did not have a lot of money back then. Those overdrafts racked up some hefty charges. She did not count on getting caught, so she eagerly handed over my belongings when police officers showed up at her door. Obtaining an affidavit was not difficult, and the financial institution where I banked returned my money and removed the fees. However, the bank did not correct the information in the ChexSystems. Soon after that experience, I moved from California to Missouri, causing me to close my accounts at the financial institution.
When arriving in Missouri, I went to a bank to open a checking account only to be turned down because of the check fraud incident. I was young and inexperienced and did not think to keep a copy of the affidavit. The internet did not exist in those days, and I did not know how to correct the problem. The banks were not helpful. They just looked at the ChexSystem report and stated, “You don’t qualify for a checking account.” “Who doesn’t qualify for a checking account,” I thought. Me! The individuals at the various financial institutions I visited did not have answers as to how I could become bankable again. However, after working at a credit union, I now know the answer.
As a disclaimer, my experience is based on working at a credit union; however, my husband worked in the banking industry for over 30 years. Banks and credit unions typically operate the same way, but banks tend to have higher fees. I do not think the individuals at the financial institutions were keeping information from me on purpose. I believe that they just did not know the answer or helping someone in my situation was not on their radar.
The first step to becoming bankable is understanding why you want to obtain a checking account. For me, a checking account helps manage my money more effectively. If I carry cash, I tend to spend it. I am motivated by what I can see happening. For example, if I have cash, I will justify eating out and buying that 6th iced tea at Starbucks during the week. Envelopes do not work for me as they are not adequate barriers to my kid’s wants or my unreasonable desire for one more iced tea or fries at Five Guys. Entering my purchase into a check register using either a paper check register, Quicken, or Excel drives my spending habits. I do not like to fail and seeing my spending habits in ink (or typed on the computer) drives me to follow the budget and watch my spending. Everyone is different, but understanding what drives your spending and what motivates you to keep it under control is a primary key to a successful budget.
The next step to becoming bankable, which I would like to define here as obtaining a checking account, is opening a savings account. Everyone that is 18 years and older should be able to open a savings account regardless of their credit score. If you go to a financial institution and they turn you down for a savings account, go to a different one.
When opening a savings account, assuming you do not qualify for a checking account, explain your financial goals to the person opening the account. They will explain to you what you need to do to be eligible for a checking account in the future. The steps you will need to take will vary upon the information on your credit report. If you do not have any delinquent debts, you probably will only have to manage your savings account appropriately for six months. If you have some delinquent debts, you may need to pay some of those down. Every situation is different, so be sure to have the individual working with you outline a plan.
Lastly, and most importantly, manage your savings account effectively. A savings account allows you to use the ATM to withdraw funds and make deposits. Create a budget for yourself and choose an amount you are going to keep in that savings account and let your savings build. If you do not need to spend any money, leave your money in your account. Also, be aware of the “six withdrawals” a month limit on savings accounts. Yes, you can make more than six withdrawals a month on a savings account; however, once you go over six, the financial institution is obligated by law to charge you a fee. Those fees can begin to add up.
When depositing your paycheck into your savings account, determine how much you will need to spend such as paying bills and have that amount held out of your deposit. For example, if your paycheck is $1,000 and you will need $300 for rent, $50 for utilities, $60 for groceries, and $30 for gas, deposit $560 of your check and keep $440 to pay those expenses. Doing this will avoid four different withdrawals.
When paying expenses that you may have to prove you paid sometime in the future, obtain a counter check or money order, whichever is least expensive. The fees for these types of checks start to add up, so it is important to devise a plan with the financial institution and to follow it to get a checking account. Also, shop financial institutions and go to the one that has the lowest fees.
Not being bankable can be demoralizing. At least, it was for me. It was also frustrating. I did not like carrying or hiding large sums of cash in my apartment. I did not like having to pay money for every money order I needed or for cashing my paycheck. There is a way to become bankable again, but it takes determination, motivation, and patience. I did it and you can, too!