I recently met with a couple who were dead set against ever having a checking account again. It’s not that they didn’t understand the value of a checking account but that they had gotten themselves into trouble writing checks for more money than their account had.
They have decided to use cash only or, only if required in the future, use a prepaid card. For them, seeing their money was they only way of knowing how much they had left to spend until the next paycheck.
Their plight underscores the challenge that many couples face. How can you get two adults to work together on responsibly spending and tracking day-to-day household and personal expenses. They seemed to have a legitimate concern for how two people could manage one bank account. Just one bounced check fee, let alone five or six during difficult times, is enough to discourage many couples from moving from a cash only system to becoming a banked household.
I think the issue for such couples is less one of whether or not they should have a bank account but how they should approach the day-to-day management of their homes. Here’s my take on the situation:
Being banked is ALWAYS better than being unbanked.
Having a bank or credit union accounts (checking or savings) can go a long way to preventing the heartbreakingly tragic situations that could come by losing a pocketful of cash or having the cash stolen from your home or off your person. Such events happen, and when cash is involved, there is no getting it back…EVER.
The challenge for many couples who have fled from checking accounts is setting up a proper system for managing their money on a day-to-day basis. Here are a couple of simple solutions that don’t even involve checking accounts. They DO require you to set up one or more savings accounts, which generally have no monthly fees but do have restrictions on how many withdrawals you can take during a month:
- At bare minimum, set up one savings account. Deposit your payroll or SSI check into the savings account at no cost (even better, have it deposited directly into the account by your employer/the government). Withdraw only the cash you need each week. To avoid additional fees, do NOT apply for an ATM card associated with the account. If you do get an ATM card, make sure you NEVER use an ATM that charges you a fee. This scenario will save you any check cashing fees you’ve been paying without a bank account. These fees may be anywhere from $3 to $30 per month. That may not seem like much, but that’s about $40 to $360 a year. Plus you have a security of having your money in an account insured by the US Government. Even if your bank or credit union failed, your money would be guaranteed for up to $200,000.
- Set up multiple savings accounts, such as: 1) General expenses, 2) Groceries, 3) Leisure/Entertainment, 4) Medium-term expenses like vacations, appliances or furniture replacement, and car repairs, and 5) Personal expenses. Set up an automatic monthly transfer from your General expenses savings account to each of the other accounts. Automating these transfers ensures that you avoid spending money in your General account that should be destined for other expenses.
If you don’t use a checking account, you’ll likely need to purchase several Money Orders every month for bills. Five money orders through the US Post Office for monthly bills will likely cost you $5-$6 each month. That’s $60 to $72 per year, not including postage for mailing the MOs.
As these indirect costs of being unbanked add up, you can see the real dollar value of opening and responsibly using a checking account. If you’re still worried you’d end up bouncing checks, don’t be afraid to go into your bank or credit union and ask for help. You’ll usually find the staff willing to help educate you and guide you in your efforts to develop effective checking management skills. Plus, you can usually check with a local nonprofit credit counseling agency like Debt Reduction Services Inc. for help.
And remember to shop around for the right financial institution to work with. Find a bank or credit union that has fees (or lack there of) that fit your situation. You’ll likely want to work with one that has a physical location close to your home and/or your place of work. Visit the branch and get a feel for how you’re treated. If you feel like you’re just an intrusion into their work, find another bank or credit union close by.
After several months (or perhaps a year) of properly managing your savings account(s), you’ll find that your bank or credit union will be more likely to open a checking account for you, even if you’ve had a less-than-stellar record with them previously. However, at that point, just remember that you’ll need to develop the checking account-specific skill of managing a checkbook register. Spending plans, as always, will also be key to success.
Please let me know if you have your own simple banking success story to share of moving from a cash-only household to one using a bank or credit union account.
If you have any suggestions or stories on how you’ve experienced relief from credit cards and other debt feel free to share in the comment section below. Tips, tricks and other suggestions are always welcome!