The Unbanked Experience

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Managing your money is seriously hard without a bank account. Loving these Fintech solutions.

A couple of weeks ago I went to this big annual conference for personal finance bloggers (or all independent financial media, as it has evolved into) called FinCon. I was incredibly honored and grateful to have the entire thing sponsored by CFSI after I wrote this piece for a contest they were having.

The Center for Financial Services Innovation (CFSI) leads a network of financial service innovators working to build better products for consumers. They do a lot of research, seed new ideas and expand points of view through activities like FinX.

What is FinX?

FinX was the very first FinCon-related thing I did while in Dallas. (Don’t worry–the tourist’s-eye-view of Dallas is coming up in a couple weeks live!)

It was also the event I was most excited to participate in during my time there.

Essentially, we got together in teams and tried to perform a bunch of life tasks on a two hour lunch break. The catch?

We had to do it as unbanked persons.

Team Grey’s Fortunes and Failures

Crystal, Jen and I were on Team Grey aka Team Brystalifer. We were tasked with completing as many of the following as possible:

  • Cash a payroll check.
  • Cash a personal check.
  • Buy a prepaid card and deposit money onto it.
  • Buy some art supplies for our “niece”‘s birthday.
  • Wire money to our “sister.”
  • Get a money order.

And I’m pretty sure there were about 10 other things on the list that we didn’t even end up having time to consider.

We started off super optimistic. The neighborhood we were assigned had a Walmart, a bank where the payroll check originated from, a cash checking business, and a pawn shop—which we would have utilized had we made it further down the list.

We should have had everything we needed.

The trouble started when we walked in the door. The line to cash a check at Walmart was insanely, insanely long.

We found out that we were in less of a neighborhood and more of a retail mecca. That pawn shop was not happening; it was across a 4+ lane highway.

We continued on our journey to cash our checks.

The check cashing place wouldn’t do it.

While the traditional bank did cash the personal check, they wouldn’t cash the payroll check. They said that it was too new and that we should come back in a few hours.

The teller had already stamped the check, but did cancel the endorsement.

We headed back to Walmart and stood in that massive line again. When we finally got to the front, the woman working said she couldn’t accept the check because it had been stamped–even after being made aware of the visible cancellation of the endorsement.

We were stuck. We didn’t have time to wait until the check was cashable, and without the payroll check, we were limited in the other tasks we could accomplish.

Crystal bought the prepaid card, but couldn’t load it. When she called to try to put ten bucks on it, they wanted all kinds of personal information. Including social security number. To load $10 onto a fee-laden card.

We did manage to get some bananas as grocery shopping was on our list of things to do. But other than that, we failed pretty hard.


Frustration with the System

Afterwards, we all came back to sit down and talk about our different experiences.

I was in no state to be talking. I was mentally drained. I think that was the biggest thing that hit me; I expected the experience to be unpleasant and difficult, but I did not expect to be so exhausted afterwards that I would have a hard time forming a coherent sentence.

If I had had my wits about me, here’s what I would have said:

I think education is great. Truly. Give people knowledge and they can act upon it. I think it’s especially useful when structured as coaching to help an individual get through a specific situation.

But I don’t think the problem here is educational initiatives. The problem is that the system is horrible, and disproportionately punishes those who have the least. You can educate people all day about how they’re going to get hit with fees because they’re low-income. You could inform about the importance of emergency funds and linked checking/savings to avoid overdraft fees.

But that doesn’t matter too much if there’s not a bank in your neighborhood.

It also doesn’t change the fact that you can spend two hours trying to cash a check only to get turned down.

It doesn’t change the fact that because you were unable to cash that check, you might be hit with fees for being late on bills you were planning on paying later that day.

And it doesn’t change the fact that while I was going back to a meeting room to discuss the experience with colleagues, in real life Brystalifer would be going back to work, unable to cash the check until tomorrow. Hopefully.

This is my personal opinion, and does not reflect the opinion of any other person or organization, but I think we have to change how we regulate financial services–not just alternative financial services. But all of them.

To be predatory upon those who have the least is a disgusting way to get rich. I’m aware financial institutions are not fond of regulation, and that current regulation is what holds back a bunch of FinTech innovations in our country.

Which is why I’m not necessarily arguing for MORE regulation, but rather a complete overhaul of the system to berid us of these reverse-Robinhood-esque practices and open up the way to 21st century innovations.

Twenty-First Century Innovations

My solution may be completely unrealistic. The folks at CFSI recommended instead turning to twenty-first century innovations for solutions.

I’ve told you before about my love for apps like ActiveHours, and there are many more on the market. Some help you get a view of your overall financial health. Some serve as an alternative to traditional bank accounts. Some target extremely specific financial situations.

Ultimately, we can’t control regulation unless we really start pressuring our representatives. And we’d need a clear end game in order to do so. That’s something I simply don’t have.

But as consumers, we can control the ways we manage our money. If you have a smart phone anyways, find a few trustworthy apps that can help out with your current money goals. It won’t fix everything, but FinTech can be a huge help when traditional financial services have left you to slip through the cracks or simply don’t fulfill all of your money management needs.




If you want to learn more about our experience, Crystal and I made an appearance on Jen’s podcast to discuss in a little more detail. You can listen to our Her Money Matters episode here.


21 thoughts on “The Unbanked Experience

  1. Laurie Blank

    Great post, FF. I remember experiencing similar things when we were young and my mom was very, very poor. Eventually she found a bank that offered free checking and savings accounts, learned to drive and bought this piece of crap $50 car that would take us places faster so that we could get our money. But a world without a bank account is definitely a huge, huge pain.

    1. femmefrugality Post author

      Wow, power to your mom! She should not have had to go through all that, and I can’t imagine the stress it put her under. Banking deserts are a massive problem, and this really shows all the extra things you have to pull off simply because you live in one.

  2. Joyce Marrero

    I didn’t go to FinCon this year, bah! I agree with regulating this financial institution as well. The fees and the way it is set up it’s ridiculous. The fact that some companies suggest people pay their bill at a local place and when they do they charge them at least $5 to pay it’s pathetic.
    Or the fact that if people use their prepaid debit card and these cards get hacked, they don’t investigate and won’t refund the customers’ money is sad as well. A lawyer told us that these companies do this because they know that the customer won’t have money to get a lawyer.
    Enough about my rant but I think that challenge you all did over there was pretty cool. At first, I thought that it was going to be easy and when I kept reading, I will admit I would have given up quickly. LOL

    1. femmefrugality Post author

      Your rant is fully endorsed. We were so optimistic at first–two hours should be plenty of time, right? But they make things SO COMPLICATED. I surrendered so quickly, I was surprised. It’s overwhelming, and like you said—what are people supposed to do? When you lack economic power, it’s insanely hard to fight back. And I think your lawyer was right–some of these companies know and exploit that fact.

  3. Emily @ JohnJaneDoe

    Thanks for this description. In my seasonal job, I work with a wide range of clients, including some who lack banking services or even a place to live. And while we don’t serve people without a current ID, we certainly have them coming in. For many of them, the money to get a valid ID is a sticking point.

    I hate that the system is so very regressive. Life is a lot more expensive if you lack basic housing, transportation, community services etc. I don’t think most people understand the truth you are trying to convey…that it sucks time, energy, dignity, and self-esteem as well as money.

    1. femmefrugality Post author

      YES. The ID thing. With finances and voting suppression. I could go on a side rant, but I’ll save it for another day haha.

      Regressive is a really good word for it, and that sucking of time, energy and dignity is spot on. It was interesting because CFSI showed us some data, and one of the biggest reasons people don’t use traditional financial institutions is that they don’t trust them–they think they’re not interested in actually helping them. It’s no wonder people feel that way.

  4. Mr. JumpStart

    I’ve always fortunate and had some form of bank to use, but I’ve used some techniques that involved money orders, reloadable cards, and Walmart, in order to reap credit card bonuses. The processes were always exhausting. Lines were randomly long. The continually changing staff seemed to make up new rules every time you went to the counter. There is also a lot of risk and fraud with these products. What if the cards/money orders weren’t processed properly by the machine or employee? What if someone tampered with a prepaid card before you took it off the rack? It can be an incredibly frustrating hassle.

    1. femmefrugality Post author

      Yes! Frustrating and at points it can even feel violating. I know that I’ve been able to find work arounds when I’ve been travel hacking, but that’s largely because I’m fully banked and have other resources available to me. When this is your only option….it upsets me that so many people have to operate in this space all the time.

  5. Done by Forty

    The underbanked and unbanked are kind of the open secret of personal finance. It’s a shit situation for people who can’t get access to traditional checking, savings, and credit.

    I worked for a company that tried to launch a program aimed at the underbanked. I left before it got going but, not too surprisingly, the credit card churning community went and abused the hell out of it. Again, I shouldn’t be surprised. Though I do wish our community would sometimes not go off and “optimize” something that is meant for people who really need help with things like cashing checks. I mean, how many free flights do you need?

    Anyway, I am generally a tech optimist, too. I think there are some neat options out there. But I’m also a fan of regulation. For example, in my state, you can no longer get a payday loan. Anywhere in the state. It’s great: one less way for these fuckers to prey on the poor.

    I think banks that benefit from FDIC protection should also be required to offer SOME sort of checking account to anyone who can provide evidence of ID, and just put protections around that account if they’re risky (i.e. – no overdraft ‘protection’…just deny the card when there are insufficient funds).

    Anyway, half baked idea, but generally I’m more optimistic about government stepping in than new companies, because often there just isn’t a whole lot of profit to be made from people who are underbanked unless the companies are also allowed to charge fees that offset the higher risk of these customers. Government can go in to areas that have little/no profit.

    1. femmefrugality Post author

      You know, I never really thought about it like that with travel hackers coming in, but that sounds about right. Right when I started, one of the major tricks was Vanilla cards. Disappointingly to me, that practice was banned literally the same month I started, but I can see why.

      Out of pure curiosity, what are the specific ways these intrusions mess up these systems so they cannot operate for the unbanked? It makes sense to me that it would be a problem, I’m just not concretely aware of how, and I’d love to learn.

      Another thing that really surprised me in this whole experience is that the people working at places like payday loan facilities were generally kinder and more apt to explain all the negative aspects of their products than traditional financial institutions. Crystal reminded me today that we were told to go to a bank and get a loan rather than take out a payday loan. The lady made no secret that the interest rate was over 500%.

      I think it’s great that they’re banned in AZ, BTW. I also love the it’s-impossible-to-overdraft-this-account idea. Would be interesting to see how it worked for paper checks, though maybe that will eventually be a moot point as more and more landlords and individuals go digital.

      As for checking/savings accounts, one woman from NJ was telling us banks are required to provide a fee-free checking option in her state. I’m paraphrasing, could be remembering wrong, and there may or may not have been minimum balance fees. But from what she was saying, I was pretty excited about it. And wondering why more states don’t have the same rule.

      Which brings me to another point: CFSI provided data that one of the biggest reasons people don’t hold checking accounts isn’t because of access, necessarily (though that is not too much further down the list,) but rather because they don’t have the income to meet those minimum balance/deposit requirements.

      R-E-G-U-L-A-T-I-O-N. It needs to change. People are literally getting punished for being low-income, and it affects how they manage their money.

      I agree that it’s hard to make money off of low-income people without charging an essential poverty tax. BUT maybe financial institutions could simply find ways to make more money off of people who can afford legal representation if they want to be ethical. And that’s not just alternative financial services—I’m talking mainstream, too. Because if they served people better, people wouldn’t have a need to turn to alternative sources.

      And in an age of millennial buying power, I feel like being ethical–really and truly and sincerely—could go a long way towards increasing your monied, able-to-afford-a-lawyer-and-therefore-going-to-invest-and-deposit-higher-sums-we-can-turnaround-and-invest-for-a-profit customer base. With a sensitive marketing campaign, of course.

  6. Matt @ Optimize Your Life

    This is a really great write-up. I think one of the most underappreciated aspects of poverty is how exhausting it is. I read a book called Hand to Mouth by Linda Tirado that talked about her experience of living in poverty and trying to navigate the system. She talks about how by the end of the day she doesn’t have the energy or focus to make good decisions, which contributes to keeping her in poverty. There are a lot of costs and difficulties to being poor that show up in the statistics, but I think the exhaustion is overlooked.

  7. Gopi

    Great post! The financial non-profit that I volunteer with has noticed this too. Our clients are low income and many are unbanked which hurts their financial health. Great write up to educate everyone about how challenging life is without good financial institutions!

  8. Jody

    I really, really hope that part of the after-action on this challenge was to send letters/emails to the places that failed, screwed up, or just have crappy policies. I’d lay it all out, too – who you all were, why you did it, what the challenges where and their outcome, and *everywhere it’s being written about* so they know the publicity it’s getting.

  9. dotti

    i agree too many fees and government regulations!! Try to go to BOA or chase with under $10 to pay a credit card….They will not take it and make a big scene..even tho i have their credit card and they have all of my information etc!!nuts

  10. Mr. FWP

    Great post, FF! I could not agree more about needing to figure out a system that works for the unbanked. It is incredibly difficult in that position – more so than most realize. Sadly, the unbanked face even more bad deals and attempts to rob/defraud/steal from them (even legitimately) than we who have banks do.

    It is also a tough situation, for regulators and society. Regulators already push banks towards offering checking to people they would not otherwise (because they lose money). The reality is that banking is far more costly to create and support than most basic checking customers can or would pay.

    I am eager to see the tech solutions: I think that can take us incredibly far. Online banking has reduced costs significantly.

    Another problem is that many solutions for the underbanked are rife with fraud attempts. Banks and other institutions limit risk by restricting their pool. When you remove that, it opens your institution up to fraud.

    For instance, your checking place was smart not to take the payroll check. Payroll checks are very often spoofed. A checking place – which is not a bank – has zero recourse if the check is bad. They eat that. (Not to defend them, but you can see why they have intense policies and charge higher interest rates than your normal bank: they deal with a LOT more fraud.) Payroll checks are easy to spoof and pass off, and hard to prosecute. You were right: they did set you up there.

    I remember the CFSI folks from FinCon and love what they are doing, especially this exercise. I am sure it was really eye-opening.

    One thing I think we can all do is to push, hard, to educate those in our sphere of influence about finances and just general life wisdom, so that people make better financial decisions in general and are better able to spot rip-offs. If we all cared for one another well, this would be less of a problem. We should talk sometime about ideas to fix these problems – they are big problems that society needs to better address. I would love to hear more about some of the tech solutions that are coming.

    Hope you are having a good thanksgiving!

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