Get your money out from under the mattress.
An estimated 9 million American households are "unbanked," with neither checking nor savings accounts, according to a 2009 survey by the Federal Deposit Insurance Corp.
If you're one of those people, you may spend more than $1,000 a year to cash checks. Your money is at risk of theft or fire, because money stuffed under mattresses is not insured. (The FDIC and National Credit Union Administration insure accounts of up to $250,000.) And if you misplaced your receipt, how would you prove you had paid the rent?
Maybe you think you don't need a bank account or that you can't get one. But you do, and you probably can.
Even those with histories of bounced checks or overdrafts can get help from programs such as Bank On and Operation Hope. Additionally, some banks and credit unions are willing to work with people who have less-than-spotless financial histories.
Christina, a Seattle resident who asked that her last name not be used, declared bankruptcy at 20 and was without a bank for the next four years. In April 2009, she saw an ad on the bus for something called Bank on Seattle-King County, a program that helped get her into a credit union. Now Christina has checking and savings accounts, plus a used-car loan. She's learned how to budget. Next up: first-time-homebuyer classes.
"I wish I had known about (the program) sooner," she says.
Who's unbanked?
Why would a person not have a checking account? Lots of reasons:- No prior experience with mainstream financial institutions.
- Blacklisting due to overdrafts or bounced checks.
- Inability to maintain a required minimum balance.
- No trust in banks (especially true of immigrants from countries where financial institutions were unstable).
- A lack of nearby banks or credit unions.
- Unaware of eligibility for an account (particularly true of undocumented immigrants) or wariness of revealing a home address.
Minority households are more likely to be unbanked, according to the FDIC survey. The numbers are grim: An estimated 21.7% of black, 19.3% of Hispanic and 15.6% of Native American households don't have bank accounts, compared with 3.5% of Asian and 3.3% of non-Hispanic white households.
People without bank accounts don't have secure ways to save for emergencies or retirement. They don't have access to affordable credit. If they need extra cash, they're likely to use pawnshops or payday lenders.
"A lot of their income (goes) to check cashing or payday lending fees," says Camille Busette, the vice president of EARN, a San Francisco nonprofit.
EARN was one of four original planning partners of Bank on San Francisco, a collaboration of banks, credit unions and community organizations that started in 2006. The goal was to help low-income residents get bank accounts and learn financial-management skills. Its goal was to enroll 10,000 people within the first two years. Instead, it enrolled 14,000 clients; today there are 40,000. Bank on San Francisco became the template for 70 other city programs, and at least two states have Bank On projects.
Jonathan Bonato, 49, is one of the success stories. He was unbanked for a decade after a snafu in the late 1990s. Temporarily homeless, he neglected to cancel an automated monthly payment that emptied and then repeatedly overdrafted his account. After that, no bank would touch him.
He used check-cashing places while struggling with underemployment, chronic health conditions and another round of homelessness. In 2008, Bonato was referred to Bank on San Francisco. Now he has checking and savings accounts and a credit score of 749.
Bonato remembers "the embarrassment of not being able to open (an account)" even after he was working again. It's great to be able to walk into a bank once more, he says: "One of the first things I do when my paycheck arrives is run down to Citibank and deposit it."
Continued: Why would banks bother?