[HalfArabian]

Hi, there are people at my work that for whatever reason do not have bank accounts. I don't understand it. These are people who own homes and have kids.

My SO has been through hard times(as well as myself) but we've always have had accounts. We try to pay cash for stuff, but to us Debit card transactions are not Credit.

Please explain it to me.

thanks,

Karen

[LexInVA]

That's bizarre but not impossible. They may keep their assets in other forms with other financial institutions.

[paulaedwina]

You've just encountered the unbanked. There are quite a few. Here's a useful article;

http://www.stlouisfed.org/publicatio...icles/?id=2039

Paula

[Thoroughbred in Color]

We have that a lot where I work, too. For the most part the people who do not have bank accounts have credit problems. They have assets, but for whatever reason have poor credit. I don't know how all banks are, but I have asked a few people that I know at my bank and credit union and they will not open even a savings account for people under a certain score. I understand not opening a checking account, because of the risk of bad checks, but not letting someone get a savings account seems strange.

[paulaedwina]

It keeps poor people poor. It costs more to be poor because of things like being unbanked. In that situation you spend alot of money in fees and charges for things like money orders or check cashing, and you don't make any interest on your savings. It's a trap for some people.

Paula

[up-at-5]

I work at a bank, and as part of my job, I open bank accounts. I see a lot of people who don't have a bank account. They use cheque cashing services for the most part, and are forced to open an account if welfare or maybe a new job demands an account in order to directly deposit their "pay". As well, for some reason, some people are afraid to keep their savings in a bank account, which makes no sense at all, as we have deposit insurance at all banks in Canada. In order to hold a mortgage at my bank and others, it is mandatory to have an acct from which the payments can be debited.
It's usually the ne'er do wells, imho, who don't have at least one bank account.
Hard to launder that money etc, through a legit account!!!

Editing to add, after reading the above posts, is that it is a requirement that we not refuse anyone a bank account, regardless if they have bad credit, in Canada. That said, I can always spot the bankruptcy clients, they rush in, claiming to hate their current bank for whatever reason, and open a chequing account so the can have their pay deposited. They never take me up on my cross sell of a new credit card, either lol.
Oh, and it's harder for the Gov't to garnish wages for back taxes, dead beat parents, etc, if the person uses the cheque cashing service. They stay off the financial grid and avoid their obligations.

[paulaedwina]

It's not mostly ne'er do wells. Look at the article I linked.

Paula

[up-at-5]

It's not mostly ne'er do wells. Look at the article I linked.

Paula

It is where I work, link or not, the majority of people I deal with who don't have accounts(aside from younger people just starting out) are deadbeats. I'd say 98%. I see it every day.

Editing to add, I'm in Canada, and our banking system is a lot different(read:better, imho, than yours in the US)

[paulaedwina]

Great. Anecdotal evidence is so rigorous.

http://www.microfinancegateway.org/g...3133_03133.pdf

http://www2.stetson.edu/fsr/abstracts2/V13-3%20A4.PDF


Paula

[MunchingonHay]

One of my exBFs refused to us a bank. Had his mom or I write checks to pay for something and his credit card was in his father's name that he paid off in cash to his father. His credit score was fine, what was not fine was his head. He thought the government (his is very anti-big brother) was out to get him and his money. He actually has stashes of gold and silver bars hidden out in the middle of the woods somewhere. Never told me where. But he paid for his new 2012 Toyota in cash.

[up-at-5]

Up here, paying for a new car in cash would raise one heck of a red flag.

[Appsolute]

I know people that are struggling have bad credit and can't get a bank account. Sounds like laws are better for consumers in CA than the US. And here your employer deducts any wage garnishments before paying the employee.... Bank not involved.

So while that maybe your experienced Canada, it s not the story for most of the unbanked here in the US.

[paulaedwina]

The unbanked is a global phenomenon that shares similar characteristics -poverty, migrant dynamics, etc.

Paula

[up-at-5]

That's too bad for those in the US. At Scotiabank, we welcome newcomers, non residents, foreign workers etc. All we need is adequate ID and we will open an account, and in many cases, offer a low limit credit card to build a credit score. It's so easy, it makes no sense not to have an account.

[laskiblue]

A PayPal account with its associated debit/credit card can function a great deal like a bank account and no fees are charged for this. I do some freelancing work through O Desk and I transfer the money into my PayPal account. The only entity that charges me a fee is O Desk ($1.00 flat fee per transfer). While I do have a bank account, I could conceivably use PayPal as my sole account because most creditors who allow online payments do take debit cards.

[twotrudoc]

Back in my days in the restaurant business I saw this a lot. One of the biggest reasons I reserve a big gallon of Hater-ade for Key Bank is they will charge fees for cashing "non-members" paychecks. Meaning, the dishwasher who made very little money was charged around $5 to merely cash his paycheck there, where it was issued. I call it Fee Bank.

A few years ago I received a check for braiding, I did not know the people and was leery of depositing it straight into my account. I happened to be out in the harbor and went to the issuing bank, Kitsap Credit Union. They wanted to charge me $8 to cash it there LOL!! Then, she offered to sign me up for an account so I wouldn't have to pay it. No thanks!! I ran over to my bank and it did clear. But still, $8!? I vowed to tell all and sundry

Anyhoo, from my experience in the restaurant business, it is mostly the very poor, those with bad credit, or those who have bounced too many checks who cannot get an account. This article has some good info.

http://money.cnn.com/2012/09/12/pf/f...nts/index.html

"Another 6.6% say they can't open an account because they lack required identification or have a negative banking history or credit profile. And 6.4% report that they previously had an account but the bank closed it -- often due to overdrafts or bounced checks -- meaning that they may have a hard time opening another account in the future."

Being financially irresponsible will follow you around! Bouncing checks is actually theft and many folks don't get it.

One thing I have noticed recently are that the bigger companies are offering a debit card that is preloaded with a paycheck (for those who do not have an account). Good idea but the company issuing the card charges fees for everything! For withdrawel, for purchases, etc.

While I can understand not allowing a chronic check bouncer to have a checking account, there is no reason a savings account can't be maintained. And, in all reality, most don't write checks anymore anyway. Between debit cards and autopay who needs to? Both of my banks (one a major bank and the other a local cu) offer free bill pay, you punch in the info and they write out and send a check. I pay my rent this way since my landlord doesn't do debit LOL!! So, really, no checks to bounce.

[paulaedwina]

The ID thing is definitely part of the problem, especially for those who are working under the table.

Paula

[MunchingonHay]

It keeps poor people poor. It costs more to be poor because of things like being unbanked. In that situation you spend alot of money in fees and charges for things like money orders or check cashing, and you don't make any interest on your savings. It's a trap for some people.

Paula

you are forgetting that Amscot will do money orders for free and their check cashing is not that expensive. I live in Tampa and there are more Amscots than Starbucks!

[paulaedwina]

That check cashing costs is costly. Even if you're paying 1% of the check to cash it that's money that is leaving your pocket 26 times a year. Let's say your check is $500.00 every two weeks (you're netting 13K a year) you're paying $5 per pay check to cash your check. That's $130/year just getting set on fire. In addition you aren't making any money in interest on your deposits so you're set back a bit more.

Of course there are other costs to being unbanked. No loans from the bank so you're dealing with payday loans if you need one.

Paula

[twotrudoc]

The ID thing is definitely part of the problem, especially for those who are working under the table.

Paula

Yes, it is. I come from a long time of being in the restaurant biz, also in the horse show scene. I know a LOT of folks who are here illegally. Some get fake SSNs and IDs and pay taxes on those fake IDs (yes, I am saying your Fed Gov is accepting fraudulent identification and profiting from it!), some just duck and hide with no ID.

I am a very, very conservative political sort. One thing that is so important to me and is where I usually split from the rest of my ilk is immigration. I believe we need to be more open to letting folks, especially those from south of the border, in to become legal citizens. Now the bums and criminals, the druggies? Throw 'em out on their rears! But hard working men and women who look at apple picking or being a groom as a pay raise? Welcome, welcome! These folks are the ones who will work hard, pay taxes, support local business, innovate, start business, and bring more diverse community involvement, thus enabling us to grow as communities, cities, etc.