No Bank Account * No Checking Account * No Savings Account * Unbanked * Underbanked * Check Cashing * Prepaid Cards

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No Checking or Savings Account? How to Survive Without Having a Bank Account

Last Updated: September 26, 2010

A surprising large percentage of the American population do not have a bank account. According to the Federal Deposit Insurance Corp., 7.7 percent of U.S. households, or about 9 million people, do not have a savings or checking account. Many studies have given credence to the theory that checking and savings account are not right for everyone. At the end of this article, we will give you some tips on how to find the best services for operating without a bank account.

These unbanked and underbanked consumers represent a considerable market opportunity for financial services companies. The unbanked and underbanked bought upwards of $3 trillion of goods and services with cash and money orders. Too often, these consumers pay a premium to get access to their funds at fringe financial outlets.

What do the terms Unbanked and Underbanked mean? An "unbanked" person is someone with no bank account of any kind: no checking, savings or credit card. "Underbanked" means a person who has some sort of bank account but still uses services like check cashing, money orders and payday loans.

So who is likely to be unbanked or underbanked?

Generally low income people do not have checking accounts, while low to middle income people are more likely to fall into the underbanked segment. In 2009, the FDIC did a study of the underbanked and unbanked. The study found that 7.7 percent of U.S. households, approximately 9 million, are unbanked and 17.9 percent of U.S. households, 21 million are underbanked.

Walmart has been adding financial services designed to cinch its relationship with the "unbanked" by recently offering a new prepaid debit card for its "credit-challenged" customers. Walmart is providing a one percent cash back bonus for consumers who use its prepaid Visa to buy gasoline, another step in its long, concerted effort to build loyalty among lower income consumers.

Reasons Why People are Underbanked:

• Distrust of the banking system.
• Cannot maintain sufficient balances to avoid high monthly fees.
• Write too few checks to need a checking account.
• Have too little income to justify a savings account.
• The decline of bank branches in many lower-income and inner-city neighborhoods has made a banking relationship inconvenient for many consumers.
• Have no Social Security Number. (believe it or not there are 20 million adults in this country who do not have a SSN)

Tips for Using "Unbanking Services"

1. Loans: Peer-to-Peer lending sites, which require no credit. Some of the big ones: Prosper.com and VirginMoney. There's also GreenNote, which provides alternative student-loan funding sources such as friends, family and alumni.
2. Check Cashing: Even big name Walmart offers check cashing for a $3/check flat fee. If you compare this with checking account fees of $10/month and you are paid twice a month, check cashing may be a cheaper alternative to banking. There are many check cashing stores around (unfortunately).
3. Credit Cards Alternatives. You can use Prepaid Cards. Shop around online to find a credit with the lowest setup fee (yes, there is a setup fee involved.) You can get one online and reload it, or buy one from a store. In this way, you can use plastic instead of cash.
4. Debit Cards: Debit cards tied to non-banking financial institutions like Paypal. This may be a good option for those who buy and sell online.
5. Secured cards: There are many offered from various banks. Your credit limit depends on your deposit (any bank will give you a savings account as long as you have 2 IDs - it's a checking account which is difficult to get).
6. Checking Accounts: Non-Chexsystems banks. You can try this list, which is kept current.