Do You Really Need a Bank?

Candice Choi, AP Personal Finance Writer, did an interesting piece on personal finance recently. Her October 4, 2010 article details her experiment in which she tried to live without a bank for one month. What did she find? Fees, fees and more fees.

Living without a Bank

Why would anyone live this way? Well, if you’ve got bad credit or a shady history of writing bad checks, banks won’t want to deal with you. Some people just don’t trust the Internet age and want to live off the radar. Maybe you just don’t speak the language.

If you’re one of these people, you may find yourself paying $28 every week to cash your paycheck. If you need to pay a bill, you’ll be charged $1.50 for a money order. You could try a pre-paid card, but those cost a dollar every time you use them. Ms. Choi racked up $93 in fees in just one month of living without a bank. Living anonymously isn’t cheap.

As it turns out 25% of American households don’t have bank accounts. Most of them make very little money, less than $30,000 annually. And the numbers don’t appear to be getting any better. The number of U.S. citizens living this way is expected to keep climbing. Ms Choi details the government push to get more of these people into banks, which may automatically make some suspicious. And when we look more closely at these fees, things don’t quite look right.

Check Cashing Fees

Look at Ms. Choi’s experiment and the fees she paid. She details $56 to cash two paychecks at a check-cashing store. Why didn’t she just go to the bank where each check was issued? There’s no fee for that. Wal-Mart advertises a $3 fee for check cashing, so paying so much makes little sense.

Cash Cards

The remaining fees were for cash cards, another expense that should be easy to minimize. Ms. Choi paid $4.95 for each of the cards she used. These cards came with various additional fees for each time you used the card, used a pin, got cash back or used an ATM. Again, these cards make little sense. Why not pay cash?

Money Orders

She has a point with money orders in that she had to get two of them because they are limited to $1,000 each. So, to pay her $1,300 rent, it cost $3.50 from Western Union. Not bad. At the post office, it would have been $2.60. So for every bill you pay, it’s another $1.50 or so out of your budget. How many utilities do you pay for in your home – five or six? Ten? Do the math.

The Cost of Your Time

Besides the fees, there is extra time involved when you have no bank. You have to wait in line to cash checks or get money orders to pay bills. Walking around with your cash can be unnerving. Plus, keeping a cash emergency fund is a big security risk. You’d have to pay for money orders to send funds to your retirement account, taking a chunk off your earnings before you even get to check how the account is doing. You can’t make hotel reservations or reserve a rental car without credit cards, so you’d have to pay cash in advance, hoping they have the room or car you need.


It looks like you don’t really NEED a bank, but life is a lot easier with one. Convenience, the ability to set up automatic savings and the security of having your money protected are all good reasons to have a bank account. Unless you can’t get one, you’re better off having one.