From Bank of America’s attempt to charge $5 monthly for debit cards to Chase’s $20 billion loss on a bad trade, the press surrounding traditional banking has made consumers weary.
Throw overdraft fees, hidden charges and poor customer service into the mix and most are left wishing for the days of stuffing cash in a mattress.
According to the Washington Post, 821,000 households dropped out of the banking system between 2019 and 2021 amidst the recession.
But for many accustomed to the average checking and savings account system, joining the ranks of the 17 million unbanked consumers can be a bit unnerving. Anyone considering a departure from their banks should consider a few of the options available before they choose to go bank-free.
Where do the “unbanked” put their cash?bad banking history calls for a change
The safety and ease of a bank is a leading reason for going the traditional route with cash. Daily Finance reports that a check-cashing store in New York charges $18.60 to cash $1,000 and $93 to cash $5,000 – a nearly two percent fee for depositing. Banks on the other hand usually allow free direct deposit, eliminating the trip to a cash-checking store and the service charge.
On the other hand, Time reported that this year a spike in bank fees swept the nation. Overdraft fees neared $30 and the average cost to use a non-network ATM rose to $3.68. While individually, these fees are less than the cost to cash $5,000 the potential to accumulate multiple charges each month is greater–making it easy to surpass $93.
For many, cashing checks and utilizing traditional accounts is a game of choosing the lesser of two evils. But other options remain.
Prepaid cards have become increasingly popular and companies like Simple are working to provide a bank feel without the unpleasant corporate additions.
Stephen A. Sam, CEO of Tri-Fin Services, weighed the pros and cons of leaving a bank.
“On the one hand, you might be able to find more attractive rates of return on your money,” says Stephen. “However, not having that brick and mortar convenience of going to an ATM and getting less overall security can be a pitfall.”
There are multiple options for those ready to leave the banking system, but it’s important for consumers to understand their own deposit and withdrawal needs and find an alternative that best suits those habits.
Is it the consumers or the institutions?
While banks certainly have a share in the blame for the expense and problems that lurk in the traditional structure, consumers must also take some responsibility. The UK just found that financial illiteracy costs their country £3.4 billion ($5.48 billion) a year. And the US has zero bragging rights over the UK when it comes to financial literacy, as our financial education structure is equal to if not less than that of our neighbors across the pond.
Ultimately, the trouble lies somewhere in the middle according to Michael C. Meyers of Truth in Equity.
“The banks themselves are not the problem; it is what they teach us about managing our personal finances and the relationship they have with our money. It’s how we use banks that is the problem,” says Meyers.
Where to deposit wages and the smartest way to withdraw those funds will always be a struggle because there’s no one perfect way to do it. Backing a choice of banking services with a strong understanding of personal habits and the products that are available is the only way a consumer can find the right fit for their finances.