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Millions choose to avoid banks
Mistrust, confusion, cost cited as principal reasons
BY JEANNINE AVERSA The Associated Press

   WASHINGTON — Grandma stuffing money under the mattress isn’t the only one living outside the banking system.
   As many as 28 million people in the United States are forgoing traditional financial institutions because of mistrust, cultural and language barriers or a belief that by the time all the bills are paid there will be nothing left for an account.
   That can be expensive and risky. People can run up big fees to cash checks, pay bills and meet their other financial needs. Walking around with large amounts of cash can also make them a target for thieves.
   The bankless are estimated to earn hundreds of billions of dollars a year in income. Seeing a business opportunity, banks are trying to draw in these potential customers. So, too, are check-cashing businesses and retailers, including Wal-Mart.
   Many people, however, still resist, preferring to remain in the financial shadows.
   They tend to be minority — Hispanic or blacks especially — as well as low income and young.
   According to the Federal Reserve, about one in 12 families — 8.7 percent — does not have a bank account.
   The number is higher for the poorest — nearly a quarter of families earning less than $18,900, the Fed said, citing 2004 data.
   For some, like Rosa Alvarez, the financial choices can be bewildering.
   “I don’t understand about this bank stuff,” says Alvarez, 54, who lives in Texas. A nagging fear that she might make a mistake “if I don’t keep up with it right or something” keeps her from opening an account. She had one once, briefly. But she had trouble keeping track of her balance. She thinks that when the account closed, she owed the bank $12.
   Carlos Maren, 25, a cook, is afraid that if he opens a bank account in the U.S., he will get hit with fees for not keeping in enough money or for taking out more money than he has.
   “My uncle sometimes says that it’s expensive … because if you don’t have money in the account, [the bank] is going to be charging you,” Maren says.
   Leonel Mendoza, 32, a hospital worker, is not comfortable with banks in this country.
   Both he and Maren do their fi nancial transactions at a check-cashing outlet in the Adams Morgan neighborhood of Washington, D.C. They say it is convenient and they like knowing upfront what they will be charged to cash their paychecks, buy money orders, and, in Maren’s case, wire money to his native Mexico. He has a bank account there.
   “It’s not real expensive,” Maren says.
   Yet those charges can add up.
   A Consumer Federation of America survey of check-cashing outlets, found that on average it cost $24.45 to cash a $1,002 Social Security check last year. A blue-collar worker pays an average $19.66 every week to cash a $478.41 handwritten paper check.
   Having a bank account can be expensive, too, if it is not managed wisely.
   Failure to keep track of an account balance can incur a penalty of $20 to $35 each time a check is bounced or an account is overdrawn.
   “It can be costly to be outside the banking system. The poor pay more,” says John Caskey, economics professor at Swarthmore College.
   “On the other hand, if all you did is take that low-income person, living paycheck to paycheck, and moved them into the banking system and they are bouncing checks and incurring fees, you haven’t done much and you may not have done them a favor,” Caskey says.
   Although there is no federal requirement for banks to offer lowcost, no-frill accounts, some do.
   “Some have very low dollar accounts. Some have accounts that have to maintain a minimum balance,” says James Ballentine, director of community and economic development at the American Bankers Association.
   Ballentine’s advice: “Do some shopping around.”
BUILDING TRUST
   The share of families without bank accounts decreased gradually from 1989 to 2001, then leveled off, the Fed said.
   Banks have an economic interest in reeling in people outside the banking system — 10 million to 28 million individuals who earn $510 billion a year — and turn them into customers who eventually may need loans to buy homes, cars and other items.
   Banks are working through community groups to ease fears, build trust and educate people about financial options. It is a challenge that can take years, bank officials say. Moreover, what may work in Houston does not necessarily prove fruitful in Fresno, Calif.
   Adding to the challenge, the bankless are slowly spreading out. Hispanics and immigrants have moved beyond traditional ports of entry, such as big cities on the coasts and in border states; they are settling in Tennessee, North Carolina and Indiana. In the same way, people without bank accounts have move around.
   The FDIC has spearheaded a project to help bring the bankless into the financial mainstream. Financial institutions, community groups and others are teaming up in nine markets — including parts of Alabama, Chicago, Los Angeles and Wilmington, Del. — to provide services including affordable small loans, check cashing, savings and financial education and for wiring money outside the U.S.
   Nationwide, there are fewer banks in poor neighborhoods versus wealthy ones, but the difference is small, according to the Federal Reserve.
   In some neighborhoods, however, there are no banks conveniently located. Federal banking regulators just weeks ago identified 3,500 middle-income neighborhoods in rural areas — from parts of Clarke, Ala., to parts of Washakie, Wyo. — that they consider to be underserved by financial institutions.  

  
  
  

Dont worry the bankless will be forced in the next 10years to be cashless just like the rest of us who are banked and continue to be cashless, using atm cards and the like.....no card-no food....the welfare/foodstamp programs are already into the programming.....

Stop pushing the loans and credit cards....you see,,,they offer services without offering education about their systems.....folks (the so called unbanked) need to recognize the outcome of over spending due to purchasing wants instead of needs.....I have yet to see a commercial on TV from any institution promoting this.....they want to make $$ no matter how it is done....Ms.Savage would agree......

Exactly. They want 'all' of the cash money to come out of the woodwork so the unbanked can beome banked and 'card freindly'. I'm sure that is the game plan. It clearly has nothing to do with underserved or underbanked. It's truly all about a 'cashless' society!

Quoted from bumblethru

Exactly. They want 'all' of the cash money to come out of the woodwork so the unbanked can beome banked and 'card freindly'. I'm sure that is the game plan. It clearly has nothing to do with underserved or underbanked. It's truly all about a 'cashless' society!

Yup a cashless and baseless society....what I can get,,,when I want to get it,,,no matter how I get it etc etc.....
If I cant see it leaving the account---it really doesn't matter ,,does it....no value, no cost, no comparisons, no thought to it......SHOW ME THE MONEY TRAIL!!!!

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Having a bank account can be expensive, too, if it is not managed wisely.
   Failure to keep track of an account balance can incur a penalty of $20 to $35 each time a check is bounced or an account is overdrawn

It's not an issue of being managed wisely, it's a matter of being a responsible adult and keeping records.  It's not difficult in the least to keep track of a checking account.  Every time you write a check, you subtract the amount of the check, can it be any easier?

I saw a sign the other day at Hannaford, it now costs $1.50 to pay a Verizon bill there.  Price Chopper doesn't take the bills at all.  So have a checking account, it does not cost you anything.  Instead of walking into the supermarket to hand them cash plus $1.50, just drive over to the bank, put the same amount in your checking account (without the $1.50 of course) and write out a check, put it in an envelope and slap a 41 cent stamp on it.  Subtract the number immediately from the transaction log.  Do this faithfully  and you will save lots of money.   And if you do direct deposit rather than walking into the bank with the same $35.46 phone bill then you even save the time of waiting in line.  And how many people not only wait in line, but make a special trip to the store just to pay the bill (as opposed to incorporating it with the week's shopping)

There's this thing called self discipline.  I think much of society has lost that.  You have the time to watch a really stupid reality show (wife swap, oops, I'm admitting I'm watching it - but tonights issue is really stupid), but people don't have time to write down the amount in a check book, go ahead, get a piece of paper.  Write the number 500.00 on it.  Now, set the stop watch, Write doesn $326.88 and subtract it.  How many second did it take (oh, and if you're under 40, go ahead and use the darn calculator).

You are right about a checking account. It really is easy. But for me, I went even easier and do my banking on line. I still have my checking account but pay all of my bills right on line. And I can do it on my wireless lap top while I'm watching Wife Swap!

Yes, we can pay everything on line and never actually get a conceptual view of the money "shrinking".....if you are over 30 you were taught how to manage cash(yes folks bills and coins jangling in your pocket) by counting, physically counting out the money to someone and actually maybe even needing to make change to someone when they gave you money for something....the current concept that we are heading towards is the lack of reality......

If you had never seen an apple and I described it to you, told you how much it was worth, it's vitamin content, it's texture, it's smell, etc,,,,, but I did give you apple pie, apple crisp, applebutter etc....you would never know unless you actually had an apple in your hand and took a bite......

I believe responsibility is key....but, what are we managing? If folks get a little card with "money" loaded onto it, what do they think they are managing? We cant be responsible for things we dont recognize as a reality.....
I say get back that coffee can.....we dont need "bankers" to tell us how to feed ourselves---they are feeding off of us in some strange way.....they system always makes that sucking sound....SHOW ME THE MONEY TRAIL.....

Quoted from senders

Yes, we can pay everything on line and never actually get a conceptual view of the money "shrinking".....if you are over 30 you were taught how to manage cash(yes folks bills and coins jangling in your pocket) by counting, physically counting out the money to someone and actually maybe even needing to make change to someone when they gave you money for something....the current concept that we are heading towards is the lack of reality......

If you had never seen an apple and I described it to you, told you how much it was worth, it's vitamin content, it's texture, it's smell, etc,,,,, but I did give you apple pie, apple crisp, applebutter etc....you would never know unless you actually had an apple in your hand and took a bite......

I believe responsibility is key....but, what are we managing? If folks get a little card with "money" loaded onto it, what do they think they are managing? We cant be responsible for things we dont recognize as a reality.....
I say get back that coffee can.....we dont need "bankers" to tell us how to feed ourselves---they are feeding off of us in some strange way.....they system always makes that sucking sound....SHOW ME THE MONEY TRAIL.....

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It's not an issue of being managed wisely, it's a matter of being a responsible adult and keeping records.  It's not difficult in the least to keep track of a checking account.  Every time you write a check, you subtract the amount of the check, can it be any easier?

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I have always thought managing your money is a easy as managing you weight-

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cash
–noun
1.     money in the form of coins or banknotes, esp. that issued by a government.
2.     money or an equivalent, as a check, paid at the time of making a purchase.
–verb (used with object)
3.     to give or obtain cash for (a check, money order, etc.).

Hmm - I had to look that one up.  What's cash?  People still use that stuff?  I thought that went out with the penny and the nickle.