Five Reasons Unbanked Workers Do Not Have a Checking Account

Adam Rust

Depending upon the kind of business that you operate, you
may have had the experience of hiring a
worker who did not have a bank account. You may have wondered how this could be
the case when a checking account is so
useful. Here are five of the most common reasons that unbanked workers give to
explain their situation:

1)   After the Durbin Amendment established limits on debit card interchange fees (the payment that banks receive from retailers when a debit card is used to make a purchase), banks were forced to rethink how they generated revenue on checking accounts. In many cases, the answer was to charge a monthly maintenance fee. The caveat was that most banks let their customers waive the fee if they had a recurring direct deposit. Many Americans do not have the $1,000 or $1,500 that they needed subsequently. More than

2)  Being charged for overdrafts ranks as the most common reason that people choose to close their checking account. Most banks charge more than thirty dollars for an overdraft, and they are willing to do so for as many as eight times in a single day. 

Start banking with one of our preferred bank accounts
Picture of card
Picture of card
A sad factory worker without a bank account

3)      They have a negative report in the ChexSystems registry. ChexSystems is a “consumer reporting agency” that monitors activity on checking and savings accounts. If an account has been involuntarily closed, if it has had too many overdrafts or bounced checks, or if it has maintained a negative balance for a substantial period, then ChexSystems will report that information to banks that subscribe to their service. Approximately four of every five banks use ChexSystem. Data in a ChexSystems report remains active for five years. Consumers with adverse reports on ChexSystems are often turned down when they apply for a new account.

4)      They come to the United States from a country where banks are not perceived to be safe. While the FDIC guarantees the safety of our deposits, similar protections are not always available in other countries. Many come from countries where bank accounts are not a typical tool of the working class. Immigrants who have arrived in the United States recently are among the groups of individuals who are most likely to rely on cash for all of their transaction needs.

5)      Apprehension: Even those born in the United States may have anxiety about a bank. It is important to remember that not everyone feels welcome when they walk into a bank branch.

There are downsides for employees and their employers when a worker elects to be paid in cash or with a check. For the worker, the cost of going to a check casher can siphon off as much as three percent of their wages. For an employer, using direct deposit is far more preferable than writing checks or paying in cash.

But this is a pressing issue in our workforce and one whose impacts are not felt solely by workers. When workers start jobs without an account, their employers have to make accommodations. Some companies use a payroll card program. That can be a good solution, but only if the account meets the needs of workers and employers. In too many cases, payroll cards are designed to make employers happy at the expense of their workers. After all, the payroll card companies sign contracts with employers - not with workers.

See Fintwist as an option for a payroll card.

Back Arrow icon
Back to list of blog posts
The Wisewage blog is not intended to describe any particular product mentioned elsewhere on the site. Please refer to each product page for details about any specific product. You can read our full legal statement about the blog here.
Thank you! Your subscription request has been received!
Oops! Something went wrong while submitting the form.

Read blogs about overdraft fees

Back to the top
Picture of Adam Rust

Adam Rust has worked to defend consumers against harmful financial practices since 2005. He has written extensively about overdraft fees, payday lending, credit insurance, student loans, prepaid debit cards, high-cost installment loans, and subprime mortgage lending. The New York Times interviewed him when it reported on the CFPB's rulemaking on prepaid debit cards; subsequently, his research paper framed the debate on consumer protections.

He serves on the Board of the US Faster Payments Council. He is Director of Research at Reinvestment Partners in Durham, North Carolina. He is the author of BankTalk. He is the author of "This is My Home: Challenges and Opportunities of Manufactured Housing" and has testified to Congress on how to redress some of the problems with manufactured housing. See more on his LinkedIn profile.