Banks: Good or evil?

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Are banks evildoers or essential service providers? Are they discriminatory fee-gougers or risk-sensitive businesses? Those are the sorts of questions you’d expect to hear after learning how many people are routinely turned away from major banks. According a recent New York Times article, more than a million low-income Americans have been blacklisted from the mainstream financial system thanks to little more than a bounced check.

Bank account fraud costs banks big time

It’s certainly been tough for the so-called unbanked population in this country. But I’m on the side of the banks in this case. They’re justified in being cautious of those with even minor blemishes in their banking history. A bounced check or an overdraft may appear to be small infractions, but they may be the precursor of larger problems to come. How large? The New York Times says more than $9.8 billion in losses were reported last year from new bank account fraud.

My take is that the financial system cannot function without sticking to a certain number of rules. It’s essential for consumers to learn what those rules are, and they should know if there are consequences for breaking those rules.

Think of learning how to drive a car. We do not send our teenagers out into the world with keys to a car without first teaching them the rules of the road. We have law enforcement officers who uphold those rules and penalize drivers who do not follow them. As a new driver, you quickly learn that it is to your advantage to follow the rules if you want to continue to be able to drive. If you have an accident (or two), then you expect to be penalized.

Learning how to manage your money is no different. You need to follow the rules, or you’ll be penalized.

Fix your bank report

Banks know who has bounced checks or overdrawn accounts through reporting bureaus such as ChexSystems Inc. and TeleCheck. These bureaus gather information reported by the banks on consumer banking behaviors. You can access a copy of your report from these bureaus for free once a year, just as you can your credit reports from the three major credit reporting bureaus. You can get copies of your report from these bureaus by calling the company’s toll-free number. If any inaccurate information is contained in your report, you can dispute it with the bureau reporting the error. The same rules in the Fair Credit Reporting Act apply to them for resolving disputes.

If you are one of the millions of people without a bank account, you may want to consider a prepaid debit card. It may be cheaper to use these cards than to manage your money with check cashing services and money orders. Most cards allow you to direct deposit your paycheck, and you can use the card the same way you’d use a debit card. To find the right prepaid card for you, do your research and watch out for high fees.

Are you one of the millions of “unbanked” Americans? If so, how are you managing your money?

Steve Bucci is Bankrate’s Debt Adviser and the author of the popular “For Dummies” series books: “Credit Management Kit for Dummies” and co-author of “Managing Your Money All-In-One for Dummies.” To ask a question of the Debt Adviser, go to the “Ask the Experts” page and select “Debt” as the topic. Read more Debt Adviser columns and more stories about debt management.

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