Without access to a checking account, many have no choice but to rely on costly alternatives for even the most basic transactions, like paying bills, withdrawing money and wiring funds. At first blush, the fees can seem relatively small: $15 to cash a check, for example, or $1 to place a money order. For people already living on shaky financial footing, however, the costs can quickly add up, eroding a chunk of their paychecks before they even have access to their cash.
Lillian Lewis, 28, who was denied a bank account in February because of a black mark in ChexSystems, said that nearly 10 percent of her $450 weekly paycheck was eaten up by fees. "It's just so discouraging," Ms. Lewis, who lives in the Bronx, said.
Residents of two neighborhoods in the Bronx paid more than $19 million each year on check cashing fees alone, according to a 2008 study by New York's consumer affairs department.
Such fees can make saving money, which is critical to building wealth and long-term financial stability, almost impossible, financial counselors say.
"Even if it's $20 in fees, that is $20 that isn't being put aside, and it means that a whole swath of people are at a true disadvantage," said Joseph Frewer, a financial counselor at Neighborhood Trust Financial Partners, a nonprofit in New York.
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Some people, like Ms. Lewis, say that they have gotten creative, using a bunch of prepaid cards to effectively simulate a savings and checking account that enables money to be separated from a pot of cash for paying basic bills. But the prepaid cards have their own fees, including fees for monthly maintenance. Losing the cards, loaded with cash, can be devastating, too.
The repercussions of not having bank accounts go beyond costs. For low-income Americans who may already be living in crime-ridden neighborhoods, carrying around money from a check casher can be dangerous. When the Pew Charitable Trusts conducted a two-year study of 1,000 families in Los Angeles that lacked bank accounts, researchers found that one in five lost money — on average $729, or the equivalent of two weeks of household expenses.
It is not just the working poor who end up on the blacklist. An increasing number of young people, shouldering student debt and facing uncertain job prospects, are being shut out of the banking system at the most inopportune time — just as they are trying to become financially independent.
Lauren Pollick, 28, who has a master's degree in criminal justice, said her inability to obtain a bank account because of her inclusion on ChexSystems set her back just as she was seeking financial independence. For about a year, she paid her gym membership and her cellphone bill on prepaid cards — or "devil cards," as she calls them, because of the high fees.
At the time, Ms. Pollick, who now has a banking account, tried to hide that she was unbanked from her colleagues at the Doe Fund, a group in New York that helps former prisoners and homeless people.
"How are you supposed to get stability in your life with these barriers?" she asked.
—By Jessica Silver-Greenberg and Michael Corkery, The New York Times