I am really having a hard time wrapping my head around qualifying for a bank account. I can understand a credit check before getting an overdraft but the right to give them your money requiring a credit check blows my mind.
From the number of posts though I have to accept that this is common in the US but I converted the kids Jr savings accounts to adult savings when they got their first jobs and in both cases they opened a no fee checking account on the same visit and they were 16ish with no credit history at all.
I wonder if it’s to avoid potential future time and administrative consumption in case someone later comes after the accountholder. After all, they (banks) have to process paperwork and respond to requests regarding liens, etc.
Yeah, I know someone who got herself in financial trouble via overspending, and after too many bounced checks and deeply overdrawn accounts couldn’t get a bank account. She was paying bills by using money orders.
Back when I was first offered direct deposit (sometime in the 1980s) I thought it was a great idea.
Then my DD got screwed up. I was in a credit union, and the credit union had a master account with a “real” bank. My paycheck would go to the master account, then get lost. It took several pay periods for everything to get straightened out.
Then I changed credit unions. The same thing happened. It doesn’t take too many stories like that for “don’t trust direct deposit” to be widely accepted.
When I opened my current checking account a decade ago, for some reason I still remember the banker telling me they look for a score of 500 or better to approve a checking account. So, it takes some truly bad credit to disqualify you. It’s a tool they use to gauge how well an individual may handle their money. A bank might make a lot off of people from overdraft fees, but only if those fees can be collected.
Right. My take is a hodgepodge of what’s been said here. I don’t think it’s necessarily a class issue; I think within the black American community as a whole, there is a widespread, deep-seated mistrust of large institutions to do them right in general. Maybe a year or two ago, I was speaking with my sister (who is black, and a teacher, so it’s not like she’s someone who’s without education), and she said she finally set up her pay for direct deposit. When I asked what took her so long, she flatly admitted that she does not trust “those folks” to deposit her pay correctly. Now obviously my sister is not every black person in the universe, but I just brought her up because she’s an example of the kind of mindset I think is common among many black people in America.
I agree that it is a poor thing. When you don’t have a cushion and you are budgeting down to the last dollar, you want to know exactly how much your check is (and if you are working hourly jobs, that can vary quite a bit week-to-week) and exactly what moment you put it in your account. You can’t risk it being a few bucks smaller or a day later than you expected.
My first reaction is to want the check, rather than the DD. I want to see the money pass through my hands. I also prefer to pay cash (which I’m happy to get out of the ATM) because it’s easier to keep track of a slowly-dwindling twenty than to keep track of where I’m swiping my card.
Also, Paper is a three dimensional objext wrought upon with worth. Legal Tender. Whereas, DD is incorporeal, Ghost Money… and it usually earns the banking industry capital on loan, and sometimes even for a fee. One in the hand, two in the bush, and something real to have and to hold is another practical reason… can never disappear into the computer abyss and unknown or unforeseen manipulation of money. Entire control of its tender.
I know this happens and people cannot open a checking account, but a bank or credit union should still allow a person to open a savings because a savings account cannot be overdrawn, you can only take out the available amount in the account.
20 years ago following a divorce I had bad credit and no checking account but was still required to be paid via direct deposit and the DD went into my savings account. So I took the money out and bought money orders.
I can’t imagine that a bank would say no to doing business with a person completely.
Not just the poor, in my experience. Maybe age plays a part. I’m 51 and would rather carry a roll of twenties than a credit card. There’s just something “real” about paying with cash that I prefer.
My white but definitely working-class parents refused to use direct deposit for paychecks. My mom’s last employer tried everything under the sun to get mom to switch to direct deposit, since out of 40+ employees, she was the only one who got a paper check, to no success. My dad does get his retirement checks direct deposited now, but it was a long process to get him to agree to it. I think the check issuing people gave him an ultimatum.
I think for them it’s a fear of bank errors (although they have never experienced one) and a lifetime of living paycheck to paycheck. They also have such a strong fear of getting ripped off that they refuse to own a debit/ATM card. They go to the bank for everything. They do use credit cards, though.
OK, I admittedly didn’t push her on this topic, so I don’t know whether she didn’t have a savings account as well. However, considering how deeply in debt she was (being a relative, we still get calls nearly every day from collectors looking for her), I wouldn’t be surprised if she didn’t want her money out there somewhere that it could be seized.
Yep, and that’s WAY more common than most folks within spitting distance of middle class would suspect. I worked for a partner of AOL for a while trying to sell educational software to people with computer problems. There were a SUBSTANTIAL number of customers who didn’t have bank accounts–they charged their AOL to a phone bill. Some of them really wanted the software, but we didn’t take money order.
If you look around, you can see this in society. Many/most grocery stores have change-counting machines in their lobbies now that skim off about 3% of the total. Why don’t these people just take their change to the bank and keep it all? Because they can’t get a checking account. Wal-Mart’s latest trick is to perform banking functions at elevated fees–check cashing, money orders, even the semblance of a checking/DDA account in the form of reloadable VISA cards.
People with literally NO financial security are out there, and you see them every day.
My company offers the option of DD or a paycard…basically an ATM card that your pay gets loaded onto. There are various fees involved with the paycard that make it more attractive to remove all your pay via an ATM as soon as it hits, but at least the company doesn’t have to issue checks. And in a few months they won’t even mail pay statements…it’ll all be online, and accessible to print at the work site.
In all the years I’ve had Direct Deposit, I have only had one problem with it, when a transmission error meant it went in a day late. Paychecks, however? Oh, they were delayed by a huge snowstorm one year right before Christmas…we had to pay some people out of the register because their checks didn’t arrive. Or they arrive at the store late, and people can’t get to the bank before closing, so they have no cash until the next day…and if they do have an account they deposit it into, the bank doesn’t credit their account until Tuesday…the money is basically off-limits to them from the time they deposit it on Friday until the next Tuesday, except for $100. And many times they can’t just cash their whole check even if they have a bank account…the bank has limits on how much cash you can get back from a check, even a business check like a paycheck. So for many people, going to a check-cashing service and paying $10 to get their whole check right then just makes economic\sense to them.
Even though a portion of my direct deposit goes into one account the day before payday, and the rest is in the main account by 6 am…and all available, there are some people who just don’t find that to be enough of an advantage, especially if they are on ChekSystems and can’t get an account at a reputable bank. My son had his paycheck bounce, after he had spent it on paying his bills…the resulting cascade of fees (and the loss of his job due to the company he worked for closing the next week) means he can’t get a checking account from that bank for a long, long time.