Millions of Americans manage their finances with the assistance of savings and checking accounts from banks and credit unions. Although it’s possible to function in society today with no bank account, it’s not recommended. This is because it is harder to use, transfer, and manage your money without a bank account, making your cash and funds less secure.
Prepaid debit cards, check cashing services, and virtual wallets such as Venmo, PayPal, Zelle, or Apple Pay can get you by. But these tactics can be substituted or added to by opening and maintaining a savings or checking account with a physical bank or credit union, which will make handling money much simpler and safer.
In today’s digital world, it’s easy to assume that everyone has a checking account. But the reality is that millions of Americans are “unbanked,” meaning they don’t have access to traditional banking services. While it might seem like you can get by without a checking account, the truth is that there are significant disadvantages to being unbanked.
One of the biggest drawbacks is the cost. Without a checking account, you’ll likely have to rely on alternative financial services which often come with hefty fees. For example, cashing a check can cost you several dollars and money orders can be even more expensive. These fees add up quickly, eating into your hard-earned money.
But the financial burden of being unbanked goes beyond just fees, Here are some of the other disadvantages you might face:
- Limited access to financial products and services: Without a checking account, you may not be eligible for certain financial products, such as loans, credit cards, or investment accounts. This can limit your ability to build your credit score and achieve your financial goals.
- Difficulty managing your finances: It’s much harder to track your spending and budget your money when you’re using cash or relying on alternative financial services. This can lead to overspending and debt.
- Increased risk of fraud and theft: Carrying large amounts of cash can make you a target for thieves. Additionally, using alternative financial services can increase your risk of fraud.
- Time-consuming and inconvenient: Dealing with cash and alternative financial services can be time-consuming and inconvenient. You may have to travel to different locations to cash checks, pay bills, or send money.
So, while you might think you can get by without a checking account, the reality is that it can cost you more money, limit your financial opportunities, and make your life more difficult
Opening a checking account is easier than you might think. Many banks offer free or low-cost checking accounts, and some even offer incentives for new customers. With a checking account, you’ll have access to a safe and convenient way to manage your money, pay your bills, and build your financial future.
Don’t let the lack of a checking account hold you back. Take the first step towards financial freedom and open an account today. You’ll be glad you did.
Why it’s smart to open and keep a bank account
Although it is possible to live without a bank account, having one has many benefits.
Having an account with a bank or credit union is an essential financial tool for most people. It makes it convenient for users to conduct daily activities like bill payment, receiving direct deposits of paychecks and other income, making transfers of money, and keeping emergency savings.
“All of these activities are easier and more secure when you have at least one bank account,” says Amy Maliga, a financial educator with Phoenix-based nonprofit financial counseling agency Take Charge America. “If you are managing accounts responsibly, there are few downsides to having a bank account, other than possibly paying fees or having to maintain a minimum balance.”
Keeping your bank accounts in good standing is essential for reaching your credit goals, even though your banking practices have no direct impact on your credit report or score.
Maliga says, “Potential lenders may examine your savings and checking accounts to see if you have the resources to repay a loan.” Furthermore, it’s more difficult to make on-time bill payments without a bank account, which is crucial for creating and preserving a good credit history. ”.
Shawn Plummer, CEO of The Annuity Expert, agrees.
“Your banking history is your evidence of responsible financial management. Making payments on time builds credit, showing proof of your financial health,” says Plummer.
You ought to be able to quickly and easily make or schedule electronic payments with a bank account, as opposed to obtaining money orders and delivering them in person or by mail. In addition, a lot of savings accounts earn a little interest every month depending on your balance and the interest rate that the bank charges.
Good candidates for having a bank account
Typically, there aren’t any requirements that must be fulfilled in order to be eligible for a bank account or credit union account. You should be able to open an account with almost any physical or online bank, many of them without any fees at all. However, you might need to keep a minimum amount in your account.
“Literally anyone with income and bills can open a bank account. There is no good reason not to have a bank account unless you have an under-the-table business and don’t want the IRS to find out the income you are earning – in which case, you are committing tax evasion, which is not a good idea,” Blaine Thiederman, founder and principal advisor for Progress Wealth Management in Arvada, Colorado, explains.
“Anyone over the age of 18 should probably have a bank account,” suggests Carter Seuthe, CEO of Credit Summit. “While it makes sense to wait until age 18 in most cases, it can actually be valuable for younger people who already have formal jobs to get a bank account to at least deposit their checks in.”
Checking and Savings 101 – (Bank Accounts 1/2)
FAQ
What is one disadvantage people face without a checking account?
What is one disadvantage of not having a checking account quizlet?
What are disadvantages to being unbanked?
What are the disadvantages of living without a bank account?
What’s more, every bank account has FDIC insurance, so if the bank goes out of business you don’t have liability for the loss unless you have more in the account than $250,000.” Another major disadvantage of living without a bank account is that there is no paper or electronic trail in place.
What are the disadvantages of a checking account?
Fees: Another checking account disadvantage is that sometimes checking accounts have monthly fees. That means paying money to use your own money. The good news is that there are some free checking accounts that don’t have monthly fees, which means more of your money stays yours, so be sure to check when you’re choosing your account.
What are the risks of not having a bank account?
“Perhaps the greatest risk of not having a bank account is that being unbanked often costs you more money in the end,” said Jennifer White, senior director of banking and payments intelligence at J.D. Power.
Are there downsides to having a bank account?
“If you are managing accounts responsibly, there are few downsides to having a bank account, other than possibly paying fees or having to maintain a minimum balance.” Even though your credit report and credit score aren’t directly affected by your banking habits, maintaining bank accounts in good standing is crucial for achieving your credit goals.