By: Dr. Daniel B. Prescott, Jr., NDG Special Contributor
This column in meant for anyone out there who does not have a real bank account. We call these folks the “unbanked” or “underbanked” and according to statistics, there are quite a few of you out there. Unbanked means you have no access to a checking or savings account. Underbanked means you may have an account, but you continue to rely on alternative financial services, such as check-cashing, payday loans, rent-to-own agreements and pawn shop deals.
On a nationwide scale, the Corporation for Economic Development (CFED) estimates almost 20 percent of Americans are underbanked and almost 10 percent are completely unbanked. On a statewide level, Texas ranks in the top-five for its unbanked and underbanked populations, coming in at 12 and 24 percent, respectively. Drilling further down to our fair city of Dallas, we rank sixth overall in the top-10 unbanked large cities. In Dallas, 15.6 percent of our population is unbanked and 26 percent of us are underbanked.
These numbers are just too high, showing the need for further education on this issue. Because despite what you may think, you can get banked today.
Let us look at a few reasons why you should obtain a legitimate bank account. If you count yourself among the unbanked and underbanked in our community, some of this may sound all too familiar. First off, households without a bank account end up paying more in fees to expensive alternative financial-service providers. For instance, owners of a prepaid debit card that allows direct deposit pay an annual average of $196.50 in fees. And unbanked households using a prepaid debit card without direct deposit pay an annual average of $488.89 in fees.
Not surprisingly, the rate of unbanked households is disproportionately high among low-income households. At Transformance, our certified budget counselors have heard the main reason people do not have a bank account is they do not feel they have enough money to meet a minimum balance requirement. But there are many free checking accounts out there that do not require a minimum balance.
If you look at the hassles involved with not having a bank account, it makes sense to look into establishing one. It takes a lot of time to jump through the hoops of alternative banking. Think about it. You have to wait in line to buy a money order. You have to travel in person to pay your common household bills. And you have to go out of your way to get to a check cashing store. Compounding these problems, each of these alternative banking shops will no doubt have their own hands out, ready to take a piece of your hard-earned money in the form of fees, some of which can be outrageously high.
Would it not it be simpler to have your paycheck deposited directly into your bank account? So you can write a check and mail it to your utility provider? Maybe sign up for the online bill pay option or swipe your debit card whenever you need? Having a real bank account of your own means paying less in fees, more freedom and convenience, and even allows you an easier route to save money for your future. Sounds a lot more hassle-free to me.
Next steps to getting banked
So by now you may asking, how can I get banked?
At Transformance, our certified budget counselors routinely advise clients to seek out a credit union. Unlike banks, credit unions are not-for-profit financial cooperatives. If you open an account at a credit union, you are considered a member and their number one priority is you, not profits. Credit unions often have low borrowing rates, minimal fees and great customer service.
Some people are under the mistaken impression that credit unions are only for members of a specific workforce, such as city of Dallas employees. However, there are several options in North Texas to join a credit union where the only requirement is that you reside and work in Dallas County. And if you are deemed eligible to join a credit union, so are your family members. Once you join, you can retain membership with all of its benefits even if you change jobs, move away or retire, so long as your account at the credit union is in good standing.
If you are one of the many folks out there who have never owned a proper bank account, we urge you to look into getting one. If you need help, we are just a phone call away. Transformance is always available to answer your questions and assist you, either through our website, or by calling 1-800-249-2227.
Dr. Daniel B. Prescott, Jr. is the interim CEO of Dallas-based Transformance Inc., a fully integrated financial services capability nonprofit. He can be reached at dbprescott@transformanceusa.org.
