Five Reasons Unbanked Workers Do Not Have a Checking Account

by
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)      They cannot meet the minimum balance requirements. 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 three of every five American households have less than $1,000 in savings. In fact, the FDIC recently reported that 66 million have no savings at all.

2)      They had a bad experience with a bank in the past. 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. 

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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. That is not the case with WiseWage's payroll card partner, Sole PayCard, but there are certainly cases out there where the "win" is one-sided.

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