A Guide to Banking Alternatives
Access to reliable, low-cost money-exchange vehicles are an important enabler of financial health. Such tools enable people to store money safely, access it promptly, budget and track their funds, and maintain the mental space and energy needed to build a financial cushion and plan for the future.
Today, nearly 8 percent of U.S. households don't have checking or savings accounts and an additional 20 percent are underbanked
. They rely on non-bank transaction or credit products that are in many cases more costly, according to the FDIC's National Survey of Unbanked and Underbanked Households. Some of these consumers were rejected when they tried to open a checking account or closed their account after it became overdrawn. Others chose not to participate to begin with due to distrust or lack of comfort with the perceived costs or risks.
Types of Accounts
In recent years, there has been significant growth in the use of prepaid debit cards as substitutes for or complements to checking accounts. In addition, there are innovations in traditional checking accounts, such as those that are check-less and online-only. Between traditional checking accounts, check-less accounts and prepaid cards offered by banks and alternative institutions, a dizzying array of products is promoted to consumers. Financial coaches can help them navigate this complex landscape and select the type of transaction product that is best suited to their situations and needs. There also are online resources, such as NerdWallet, that provide information to educate consumers as they make financial decisions.
Below is an overview of the various types of accounts.
Questions to Ask When Choosing a Banking Alternative
- Do you currently have a checking account?
- If not, why not? Have you applied for one in the past?
- If yes:
- Are you happy with your checking account? What features do you like?
- What are the disadvantages with your current account or institution?
- How do you use your checking account? How so you wish you could use it?
- Are you worried about fees? (Have you paid overdraft fees in the past? Is that a reoccurring problem?)
- How important is access to physical offices?
- How do your pay their bills (online or through checks)? Is it a challenge to pay bills on time?
- Have you used a prepaid card before? If yes, for what did you use it?
- How comfortable are you in using smartphone/internet apps? Do you have a smartphone? Internet access at home?
- Do you check your balance online and/or register for text alerts or reminders?
- Do you use budgeting tools online? Would you like to?