You’ve had it. The mob bosses in charge of your money – otherwise known as your bank – have taken you to the cleaners one too many times. They like to post debits before credits and their on-line balances can lag a day behind. You start to ask yourself,
According to a 2013 study conducted by the FDIC, nearly 9.6 million households don’t utilize a bank. Their reason for doing so varied. Many people fear they can’t afford to open an account. Some households felt they didn’t make enough money to warrant paying the fees associated with maintaining an account. Roughly one-third of those surveyed (34%) reported they just didn’t trust banks.
Whatever your reasons, in an age of prepaid debit cards and a check cashing outlets, the need for banks has become less and less necessary. But choosing whether or not to go bankless depends on your answer to a variety of questions. Here’s what you should consider:
1. How in debt are you? If you have a slew of bills each month, you’ll need to rethink the way you pay them. It might not be worth is for you’re constantly having to run to the Post Office to purchase a money order ($1.50) or paying to use your pre-paid credit card ($1.50 to $3.50 per transaction). It may be cheaper to keep your bank account.
2. How will you pay your bills? You won’t be able to head to the post office and drop a payment in the mail. You’ll need to determine where your creditor’s payment centers are located, and what types of payment they will accept. Cash will always work, but only if you’re dealing face to face. Sometimes that’s simply not an option with out of state vendors.
3. Will paying with cash hurt you in the long run? Some creditors require automatic payment. Many times those same creditors offer discount rates because of your auto pay status. Make sure you won’t be penalized for going bankless.
4. Do you travel a lot? Assuming you’ve sworn off credit cards as well as banks, you’ll need to consider the following: Most rental car agencies and hotels prefer credit cards, and if they do take a debit card, they’ll often time require a second form of ID – such as a utility bill or a bank statement. Both hotels and rental car agencies will pre-authorize potentially hundreds of dollars on your pre-paid card. That means you won’t be able to access all of your money until they release those funds back to you – after you’re done with their services. So if you decide to go bank free and you travel a lot, remember you’ll need more money in reserve than normal.
5. Do you routinely receive large checks? Maybe you’re paid a high salary. Maybe you do contract work which means large retainer fees. Whatever the case, you’ll need to think about how you’re going to cash those checks. Most states put a cap on how much a check cashing vendor can charge – usually about 1.5 percent, but that can add up to potentially hundreds of dollars. Anything over $10,000 will be reported to the IRS. That opens up another can of worms.
The Best Of Both Worlds
Sometimes it makes sense to hold on to your bank account, and if you’re smart with your money, you can do it without it costing a dime. Many banks will give you free checking as long as you use your debit card a certain number or times each month. Make small purchases: rent movies buy a pack of gum, whatever you need to do in order to meet their minimum requirement to keep the account free each month. Use the card and get a free checking account which, in turn, means free check cashing and a free debit card.
Still Not For You?
Okay, so let’s ditch the bank. Here’s a few of our favorite prepaid debit cards:
PayPal: But wait, you’re thinking, isn’t PayPal for on-line vendors only? Not so! PayPal offers a pre-paid debit card that’s hard to beat. There’s no charge at the register to swipe your card and it cost less $5 to activate. Plus, you can link it to your PayPal account for easy on-line spending and transferring funds from one account to the other.
American Express Serve: Everyone seems to be talking about this one. And why not? There’s no activation fee if you do it online and they won’t nickel and dime you to death if you withdraw money from an ATM. In fact, they won’t charge you for that at all. Nor will you be charged a transaction fee every time you swipe. They will charge you a $1 monthly maintenance fee to use the card, but that’s pretty much it.
Walmart Debit Cards: It’s hard to beat the convenience of a Walmart debit card. Their stores are everywhere, so if you like to deal with someone face-to-face, this is your best option. They have a basic card (which will cost you $3.00 every time you load it), on up to a preferred card (which will cost $4 to purchase, but offers perks like no monthly service fees if you utilize direct deposit, and no charge to reload).
Prepaid debit cards seem to change monthly and so it’s always a good idea to look around. Be careful though. A lot of them will charge you every time you swipe your card, so do your research! You can start by looking at our prepaid card review section to help you wade through the options.
The Bottom Line
These days there’s less and less reason to use a bank. No more worrying about overdraft fees. No more being nickeled and dimed to death. No more being chained to an organization that likes to play games with your money in hopes of tripping you up. Financial freedom through choosing to go bankless.. It’s an option worth exploring.