The Best Options for the Unbanked

by Sam Burgoon on September 24, 2012

Post image for The Best Options for the Unbanked

A few years ago, people that didn’t meet bank account eligibility requirements used to pay high fees and charges for individual financial institution services like money order and check cashing. This lack of banking system access used to affect millions of Americans, but not anymore. Now, there’s a surge of banking options and services, which allows almost anyone to have access to financial services.

The Unbanked

People without access to traditional banking services are called “the unbanked”. The unbanked basically face many issues that make traditional banking services difficult to use such as:

  • Not enough money to maintain a minimum balance.
  • Can’t get bank accounts without fees due to lack of direct deposit paychecks.
  • No local bank available in neighborhood.
  • Problems with the English language, which makes it hard to use bank services.
  • Don’t keep a proper check register.
  • Unpaid debts or bounced check history.
  • Work schedule conflicts with bank service hours.

Experts consider that anyone having at least two of the previous issues makes traditional banking services virtually out of reach. The good news is that if you have a financial situation that makes it difficult to use conventional banking services, several financial alternatives are available. Some of these financial alternatives are even less expensive than traditional banks, such as prepaid cards.

Prepaid Cards

Prepaid cards are a great alternative for the unbanked. With a prepaid card, the unbanked don’t have to cash checks since the money can be deposited directly into the card. This is a cheaper way to get access to funds via ATMs over cash checking services. If you consider using a prepaid debit or credit card, here are some things for you to consider:

1. Fees: Prepaid cards can have multiple fees based on the card provider to add funds, get cards, check balances, use ATMs, and monthly maintenance. These fees are provided for users to check without hidden charges. In addition, prepaid card fees are low, and they can even be lower than using a traditional bank account if used correctly.

2. Regulations: Always check for current regulations on prepaid cards like the recently introduced new cap on debit cards’ swipe charges. As such, reloadable debit cards are available with no overdraft and one-time ATM fees based on the card provider.

3. Availability: Most major card providers offer prepaid reloadable debit cards with one free ATM withdrawal like Visa, MasterCard, and American Express. Some prepaid cards even have access to online services such as free balance checks. As competition grows, prepaid card features will also improve.

Even as traditional banking services are better for most consumers, there are many financial options for the unbanked. Nowadays, the unbanked can get prepaid cards with low fees to access most financial services that couldn’t be afforded before due to high fees and charges. If you are unbanked, save some money over cash checking services and money orders with a prepaid card that suits your needs.

Photo: Paul Sableman


Sam Burgoon is a social media marketing executive for several personal finance websites. He has a degree in business administration and marketing and has previously worked for companies like Bank of America and Oracle.