People without jobs and permanent addresses cannot open bank accounts. That's why a local credit union is so popular in my neighborhood. They provide bank accounts for poor people.

Like bodegas charging twice as much for food, check cashing places charge exhorbitant rates, taking a percentage cut out of the checks they cash.

Thanks for posting this--I've often screamed at the ads on TV that focus on the convenience aspect of check-cashing businesses, and never gave a thought to how access to checking accounts might be restricted by bad credit, etc. It's been so long since I opened an account, I forgot about the process and just concluded that it was a lack of money for minimum deposit or balance that shut so many people out of bank accounts.
Look at that, I learned something already this week!

I'm going to disagree, in part, as someone who's dealt with this issue in his own family. It's true some people can't get a checking account, and from that perspective, you're 100% correct to ding Seth.

At the same time, there's a considerable percentage of people who can, and who don't, and who pay through the nose for not having one. And he's right, based upon my observations, about the motivations of those folks.

You know, if this is his first offense you might want to give him a pass. I think he has a point about people allowing their emotions to overrule rational financial decisions, and this is not just limited to poor people. I have friends who have money sitting in their savings accounts, earning what, like, 3% a year, while they carry credit card debt with a 21% interest rate. Like, they could just pay it off all at once, but psychologically, they want money in savings.

That said, he does seem ignorant about the hurdles that some people have to go through to get a checking account. But man, those payday advance services really piss me off b/c they exploit people who don't know any better!

i have to say...its really refreshing to see that this post is considered a feminist issue enough to make it on here.

i think its important to recognize that classism and feminist issues are so closely tied. thanks for this post.

Jen nails it. I think there's a "noise" inside some writers' heads that makes them believe that the thought processes of those they consider less intelligent than themselves -- eating fast food because it's cheap, worrying about breast cancer more than heart disease -- are "irrational", when in fact there are often very sound reasons behind them. Usually they use some extremely simplistic economic or probability analysis to come to this conclusion, when the reality is far more complicated.

When I taught in a Community College, I taught a unit on privacy/personal information in my ENG 101 class and I was astounded to learn that many of my students had wrecked credit as a result of a relative using their social security number when they were minors for utilties/credit. Once one's credit was wrecked and they couldn't get the heat turned back on in their name, people would use their children's or their nieces/nephew's social security numbers to access basic services (and sometimes, more dubiously, for credit cards). Of course, then they would fall behind (because of minimum wage jobs, poverty, unexpected expenses--which hits us all, but totally screw over the poor--and then those social security numbers/credit records were "bad" or "uncredit-worthy."

Its a sad cycle, and once those minors are adults, they can't get credit, checking accounts, sometimes even student loans--all because of a corrupt system and an illegal usage of that corrupt system.

So, to blame people for having to resort to mobsters--mobsters like Citigroup--for check-cashing and the like is bullshit; its all a result of the initial pain of economic life among the poor and children born into poverty. What's irrational is our current system of legalized graft and corruption.

peace

I have a friend who makes over 70k/year and can't open a checking account. A while back she closed out her account at TCF Bank here in the Twin Cities (avoid them at all costs). She didn't have an account for about a year, and then tried to reopen one at another bank. TCF claimed that they had "discovered" an account of hers that they had closed years prior and marked her as a credit risk. Banks circulate records of "bad risks" around, so she was essentially blacklisted her from opening another account anywhere else. Not only do her records show that she doesn't owe the money in question, but TCF didn't find this mysterious account until after she closed everything out with them - and had previously told her she didn't owe them anything. Oh, and the bank also claims that their records of this account were destroyed so there's no documentation besides what is in their computer. It's a classic shakedown - unless she has the money to sue the bank or pays up what she doesn't actually owe, she can't open another account, period.

If you ever have an account closed, whether you legitimately owe the money or if you're a victim of a bank scam like my friend, you can never open another one anywhere until you pay what the bank says you owe. It shows a pretty remarkable level of ignorance to claim that people using check cashing services can "just go open an account." I don't know much about this author, but I'm guessing he's never known anyone who was genuinely poor. He sounds like one of those economic conservatives who maintain that poor people are obviously stupid because, well, they're poor, and anyone smart would be more successful. You know, because in the bizarre alternate universe those conservatives inhabit luck and privilege have absolutely nothing to do with whether or not you can get a decent job.

The other reality is that cashing checks takes time. Deposits are rarely available same-day; if it's an out of state bank it can take 5 days. For many people, this is simply too long to wait for their money. The reasons WHY it is too long vary by person and background.

Some need it to eat, commute to work, sustain themselves, etc.

Others simply can't deal with the concept of waiting, or have other "less rational" reasons for demanding immediacy.

It's insane to blame people for things which are beyond their control. But I confess that I do know a lot of people (including me!) who are less than rational sometimes.

I mean, who here hasn't failed to pay a credit card bill on time, once in their life, while they had money earning 0.5% in some random savings account?

I work in a small shop that cashes checks for locals as a sideline ($20 to cash a check of $800), and a lot of our customers just don't trust banks. Completely understandable, I think. If you have too small a balance for too long, the bank may just decide to close your account--and keep whatever money was in it.

TCF is a terrible bank. They have quotas--employees must sign up so many people for checking accounts every day. A check drawn on TCF will most likely bounce.

Poor people (of course, not only poor) can be hit with very large fees even when the account is "free". I know I grad student who moved out from the town where he was undergraduate, and just left behind an account with ca. 10 dollars and a "floating check" for 20. Sloppy. In four months, the balance of fees and penalties was 500 dollars.

I guess that horror stories like that (and dearth of no-fee accounts) can make people to stick with the evil they know. With cash checking, the fees can be high but there are no surprises later.

By the way, I was not aware that you need a credit rating to open a checking account. For sure, there was a period when I had rotten credit rating and a checking account (the rating was rotten because of ludicrous mistake by Bank of Boston, and bank account existed already before it happened). Moreover, foreign students can open accounts as soon as they get their temporary SSN. Basically, if you have a checking account, there is no credit extended, so why a rating?

I think that either banks should be obliged to have some accounts appropriate for poor people, with reasonable costs and fees or we should have what many countries have: post offices offering such accounts.

There is also an issue of bank distrust and distrust of government. If someone is an undocumented immigrant or comes from a country where banks are not insured by the government, s/he may not want to give personal information to a bank/leave his/her money there.

The question is not, "Why do poor people use check cashing services when checking accounts are free?" but rather, "Why aren't smart, educated people like Godin advocating for regulation in the sector to reduce fees/force full-disclosure of terms/etc.?"

While I'm rabidly anti-RAL, some tax preparation services such as H&R Block are reaching out to unbanked consumers by offering an option to have their refund stored on a bank card, which they can access from any ATM or use like a debit card for purchases. The card is rechargeable and may serve as a stepping stone to opening bank accounts. Some payroll services offer a similar option for employees - have your check deposited into an account maintained by the payroll service, for which you have an ATM/Debit card. These are all steps in the right direction but I think it's going to take serious local regulatory crack down to have an impact on sketchy payday loan/RAL practices.

"By the way, I was not aware that you need a credit rating to open a checking account."

Same. I've never heard of that. I've had a bank account since I was ten years old. Fees are low until you are 18 or not a student. People are not borrowing with a chequing account. Why would you need good credit?

I don't think you need good credit, you just can't have bad credit in order to open one.

Lyndorr, I was thinking the same thing! IS this maybe an American thing? I live in Canada and have never heard of such a thing. I've had a bank account with many different banks since I was 16 or so and all they ask you for is proper ID to make sure you're not using someone else's name. Like lyndorr said - you're not borrowing money, so I don't see why credit would matter?

"I have friends who have money sitting in their savings accounts, earning what, like, 3% a year, while they carry credit card debt with a 21% interest rate. Like, they could just pay it off all at once, but psychologically, they want money in savings."

I thought the idea often is to have *some* money left in savings while paying off the debts, since having $0 in savings and an unexpected emergency costing $300 means putting that $300 on the credit card...

I have to disagree with this one. While not everyone can get a checking account for free at a bank, almost anyone can get a free checking account at a credit union and all you need is to be considered a member of the local community; basically have two pieces of mail from your current address. Some bigger stores will also cash personal checks and some banks will as well if you have two forms of ID.

1) You can't have bad credit and open a checking account, because the bank suspects you will bounce checks.

2) You can, however, open a SAVINGS account with bad credit, as you don't get to use any checks.

3) For most people, a savings account works just as well as a checking account if you're going to "cash" a check. You just deposit it and withdraw what you need.

For the vast majority of people, it is possible to qualify for some account in which they will be vastly better served than by using check cashing. Those accounts are widely available.

Yes, there may be limits. Perhaps you can only make two or three withdrawals a month. Perhaps there is a fee. But those accounts EXIST, and people don't use them.

A quick check at sovereign bank (for Massachusetts) shows that you can get
-A basic savings account, minimum balance $250 ($1 per month below that)

-a passbook savings account, minimum $%100 but $3/month under that.

And so on.

Now, while I dislike the concept of minimum balances, i can see that $1/month is not entirely unreasonable, and it certainly is a hell of a lot cheaper than cashing checks, etc.

I can only take Seth Godin in small doses. He strikes me as kinda Andy Rooney like. He makes little observations about things in our world and wonders how they got that way, and how they could be improved. Good, to a point, but it's like the world exists in a vacuum of his own head, with no other mitigating factors that he hadn't considered entering into the equation.

Because of bad credit, several years ago, I couldn't open even a SAVINGS account at any bank. I knew that I'd managed my money poorly, that I wasn't ready for a checking account. So I wanted to open just a savings account. No one would let me.

Luckily, I found out about a local credit union.

So two things:
1)yes, your credit can negatively impact your ability to open a checking account
2)not everyone knows about credit unions. and even if they do, not everyone realizes that some credit unions are open to community members - I sure as hell didn't. on average or historically, credit unions are only open to certain people (usually employees of a specific company/organization)). So it makes sense that many wouldn't even think of that as an option.

People's class experiences are certainly showing in these comments. I'd encourage people to actually find out more, look outside their own experiences before being so quick to judge.

It depends on the bank whether or not you need credit history, and the quality of the history X bank will accept.

Unless we're talking about extreme situations like banking in India and micro-lending (see the brilliant Muhammad Yunus and how he's picked women up out of poverty), in America, anyone can get free checking usually. You may have to look a little further for it, but it's out there. Bank of America, for example, puts requirements on its most basic checking accounts if you open them in the branch, but if you open them online, it's free. Even if you do not have a computer or the Internet, the library does.

And with FICO scores, credit history, etc., it's not the only way to determine good credit. Banks who do soft or hard pulls on credit may not want to bother, but if you're persistent you can prove you've made on-time payments and make your case to get a checking account. Again, it probably takes more work, but I think it's an exaggeration to say people in America can't get a checking account IF they're working and pay some bills. However, if they're homeless, that's obviously different and a different, more creative situation for that is required, like Yunus in India did.

And tangentially re: 0.5% on savings... seriously, move out of brick and mortar savings. Even credit unions are just pathetic compared to rates you can get with online savings accounts with so few restrictions (EmigrantDirect makes you maintain at least $1 in the account and has no fees -- I think everyone can afford that in America).

Absolutely true, Jen. I recall when I wanted to open a simple checking account at Wells Fargo for something having to do with college. They wouldn't do it, even with a cash deposit, because I'd bounced one check TEN YEARS PREVIOUSLY. So I said to hell with them and went with Washington Mutual. But good god, if my record was good for 10 years and that wasn't good enough? I dread how anyone with a real problem could get one.

Some bigger stores will also cash personal checks and some banks will as well if you have two forms of ID.

I've been reported to Chexsystems (my own fault for bouncing checks in the past, so I try not to complain. I'm fortunately not in a position to have to call myself poor, thanks to family support.)

I cash my paychecks at the bank they're drawn on but it does cost $5 per check. Dealing with several small checks, check cashing places can be competitive with that.

As far as I know no major bank will let me have an account right now, so I've just let the whole thing go and lose a little money each time until my record clears.

I do know people at my job who just don't bother with a checking account. That may be a poor decision but it's not some kind of stupid emotional brain thing. I think bank distrust is a big part of it, plus check cashing places often offer other service such as wiring money to other countries where people may be supporting their family members. (I have no idea how that would work with a bank.)

Thanks for the post. This kind of rings home for me, having gone through the experience Thealogian described, where my mom would use my SSN for things like telephone bills and utilities, when she couldn't pay. Later, when I went to go open an account at Chase, I was declined a checking account there because I had bad credit. They offered me a savings account, but with a hitch: I had to wait a day for my check to clear before I could access my funds.

Now, for some this doesn't seem like a big deal. But when I look at it from my mom's perspective... Okay, so let's say you go into a bank, you try to sign up and get declined. How discouraging is that? Are you going to go to a bunch of other banks or credit unions and go through that humiliating process again and again until you get "lucky" enough to get to have access to your own money on a regular basis? Not to mention the fees and things that go along with "free" checking.

And if, let's say, you go with the savings, it's hard to wait 24 hours when your kids don't have food and there are late rent payment demands nailed to your door. Sometimes, even if you have to take a $20 hit, it just is better to have the cash in hand now, then to deal with the hassle.

Poor people don't get a lot of security. So you try and take the safest route you can sometimes.

The fact that bad credit can prevent a person from opening a bank account is something I just learned recently. A friend's fiance was only able to find one local bank that would take him after his ex-wife severly messed up his credit. And he makes $50k to$60k.

That said, if the bank the check is drawn on has a branch in the area, people can get their paychecks cashed at that bank for no cost.

Just because you don’t understand the reason for some behavior doesn’t mean there isn’t a perfectly rational reason for it.

Well, granted. Of course, your idea of what's rational may vary from someone else's.

For instance, not wanting to deal with the potential embarrassment of having your application for an account rejected is a reason for avoiding banks, but whether it's rational is pretty debatable.

That 'family members using children's SSNs' is just weird! Do banks actually think that children can accrue any kind of credit, good or bad? I would have thought any credit problems when you are a child would be the parents' problem. And do the utility companies or whatever not check to see if the SSN belonged to an adult? I know I (in Canada) couldn't get a phone, in my own apartment, unless a parent cosigned, since I was 16.

Would the only way to get your credit fixed in such a situation be to report the parent for fraud?

I opened my account with my first paycheck at 14. I never understood why my parents insisted on paying everything with money orders rather than getting a checking account and paying with checks. Not until I began to see how institutions such as banks that supposedly benefit everyone, actually stiff people out many times. There is a lot of fine print, or catches that are not always disclosed, or fully explained to people, especially those from low-economic backgrounds like my family. Even recently there are stories of bank employees who gain the trust of their customers for years and swindle them...it's just one example (Highwood Bank, I believe it was called, who stole life savings from immigrant workers), but it reinforces the idea that people already have of not trusting others with money they work too damn hard to get.

Savings accounts also allow one to cash checks. I don't have the credit to open a checking account, but have had no problem cashing checks via my savings.

For those curious as to why bad credit keeps you from getting a checking account: overdraft; defaulting on your overdraft makes it impossible to ever get a checking account again.

First I'd like to agree with a few previous comments and say that it is great that this issue is a focus for feministing! As feminists we cannot forget about the intersections of race, class, nationalism, heterosexism, etc in our daily analysis.

With that being said I would like to comment on the idea that those who are facing charges at one bank or agency can just walk down the block and find another bank or credit union. More often than not, the financial institutions in a given area are there due to the social class in that given neighborhood. So if you are living in a poorer section of a city then you most likely do not have as many options on places to do your banking. Often times, these banking agencies are set up simply to scam people out of money. While banks also try and take your money, there are at least federal guidelines for such activities.

While there are many great points in everyone's comments, we cannot forget about geography and access to different and changing parts of a community. If you literally cannot get to a sound bank then you are trapped into what is near you.

The whole point of marketing research is to praise people for doing what the model says they should do, and scold them for doing what the model says they shouldn't until one of your grad students has a time to write a paper with a new model.

Scolding a marketing expert for making a judgment like this makes about as much sense as scolding a dog for sniffing the chocolate chip cookie you dropped on the floor.

Well, rehabilitating a marketing expert may not work, but it's still worth posting about, given that many comments here suggest "regular folks" in the feminist community can also benefit from examining their own class biases. I would not know anything about the difficulties of banking for individuals with very low income or who have no income or are homeless, if not for my current job. I believe there are various legal and financial problems, etc., that can preclude someone from opening a bank account, which can include defaulting on a loan at one time or another. Most of us are coming at this from the perspective of someone in their 20's or so, but for folks in their 40's and 50's who are unemployed or sporadically employed due to a disability or addiction or another life circumstance, who have supported families, struggled to provide or obtain child support, etc., there are a lot of years in their history in which something more serious than bouncing a check could have gone wrong and made establishing a bank account difficult.

I'd also like to point out that "online banking" is not necessarily a realistic alternative for a lot of people of low socioeconomic status or who are unstably housed...not everyone has the Internet or regular access to it.

Also, realizing how terribly self-righteous I sound, I am someone who came out of college claiming to my non-American friends that the American health insurance crisis was totally *bogus* - snottily saying something like, "If you have a job, you have health insurance." Blissful ignorance, based on my own privilege and what I had seen in my own privileged circle and community.

I also thank you for featuring this issue. It is another important aspect of recognizing privilege and how it taints perceptions. For example, I would not expect members of Congress to have problems like these high on their list of priorities. Reelection is probably more important to them.

"I don't know much about this author, but I'm guessing he's never known anyone who was genuinely poor. He sounds like one of those economic conservatives who maintain that poor people are obviously stupid because, well, they're poor, and anyone smart would be more successful. You know, because in the bizarre alternate universe those conservatives inhabit luck and privilege have absolutely nothing to do with whether or not you can get a decent job."

Precisely. I hate it when people think like this, nearly by definition in judgment of someone else less fortunate. I personally hear it most often from successful people, or people like my mother and father, who were career long civil servants with pretty incredible job security and retirement benefits (how does retirement at 55 or thirty years of service, and two thirds of your highest year's salary, PLUS Social Security, for the rest of your life sound?). It is even more frustrating when fellow people of color (or immigrants) speak or write like this, as if JUST working hard made a successful career or business, as is common belief among Asian Americans in Hawaii. Perhaps they did not take note of Small Business Administration and The National Federation of Independent Business findings that "As a general rule of thumb, the SBA states new businesses have about a 40% chance of surviving for five years or more . . . . . And according to the NFIB over the lifetime of a business only 39% are profitable."

This according to Abbie Drew, "Highlighted by Robert Allen
Compared to Seth Godin and Meg Whitman of Ebay."

http://www.demc.com/artman/publish/article_175.shtml

I have even read that "80% of New Employees Fail Within the First 5 Years"

http://www.stevepavlina.com/blog/2005/08/80-of-new-employees-fail-within-the-first-5-years/

though he does not explain the figure. I have read similar findings of periods as short as three years.

"Also, realizing how terribly self-righteous I sound,"

Prior to returning to the US and using up my life savings on college and living expenses for three years, I told my wife until just last year, that getting a nursing license and living in the US, more precisely, my home town where my family has roots and connections, was a surefire way to a better future.

Until one of those state or federal jobs comes through, I was dead wrong.

A male, at least your example sounds like *hope*...mine was just pure elitism.

I didn't know about credit unions until I went to community college and they not only offered me a free account (the minimum is 5 dollars they "give" to you) but also a student visa. I had heard of them before, but not checked them out. I'm the last person to talk about personal responsibility, but I think this is an instance where people have to be personally responsible for themselves. I came from a lower class background and was never taught a thing about money, but I researched this stuff when I turned 18 and entered the real world. I wish there was more education out there, but banks are in the business of keeping the rich, rich and the poor, poor.

You have to have photo ID to open a bank account. I had a situation for many years where I didn't have a driver's license and I could not get an official copy of my birth certificate. I had to use check-cashing services or deposit the money in my (now ex) husband's account.