Life without a bank account
For most of us, having a bank account is as natural as breathing. But according to the Federal Deposit Insurance Corp., 17 million Americans are unbanked, meaning they don't have a bank account, while another 51 million are underbanked, which means they supplement their bank account with alternative financial services. In both categories, consumers often turn to nonbank financial products that many consumer advocates describe as predatory at worst and insufficient at best.
"(The unbanked and underbanked) are more likely to fall victim to the high-rate (predatory) side of the industry, like payday, account-advance, tax refund-advance and structured, settlement-advance loans, to name a few," says Mitchell Weiss, an adjunct professor of finance at the University of Hartford (Conn.).
Typically, the unbanked and underbanked tend to be poor and working class people who choose to stay away because they either don't have the financial resources to maintain a bank account, or lack knowledge of how the banking system works, Weiss says. But that's not always the case. In fact, there are a number of reasons why some individuals are unbanked or underbanked.