Why should I get a bank account?
If you currently use check-cashing services, a bank account can be a better and cheaper alternative for cashing checks and paying bills.
Without a bank account, you and your family could lose your money during an emergency, like a hurricane or a fire. You also have no safe place to keep your money and you may become a victim of robbery or theft. Money deposited in a bank is protected by the full faith and credit of the U.S. government. Some banks in Massachusetts are covered by FDIC and the Depositors Insurance Fund (DIF) which provides full insurance for its customers’ deposits and accrued interest without limit or exception. Each depositor is insured by the FDIC to at least $250,000. All deposits above the FDIC insurance amount at DIF member banks are insured by the Depositors Insurance Fund.
It Saves You Money
Using check cashers may seem more convenient that having a check account but those services cost you a lot more. Check-cashing stores can charge you up to five percent or more of the check amount simply to cash a check. A 2010 study by the Massachusetts Division of Banks showed that, on average, consumers will pay four to forty times more in fees to check cashers to cash payroll checks and write money orders than they would pay using a Basic Banking checking account. For families with incomes of less than $40,000, this can add up to more than $1,000 a year. We want you to stop paying those check cashers!
With a checking account, you can deposit your checks and access your money for little or no cost. You can save money by paying bills with checks, on the Internet or by direct debit, and avoid paying for money orders. You can use your debit card to make purchases at stores or to withdraw money from ATMs, reducing the need to carry cash. You can also keep track of your spending on the Internet, by phone or at the ATM. Many employers (maybe you!) encourage or require employees to use direct deposit.
You Can Save for the Future
Without a bank account, it is much more difficult to save your money to reach long-term goals, such as buying a home, starting a business or investing in your or your child’s education. Studies show that people with bank accounts are more likely to save and move up the economic ladder to financial security. Funds that are set aside for specific purposes and financial goals are more likely to be achieved when they are separated by specific accounts. You can have as many checking accounts and savings accounts as you have needs and goals. Since the Federal Reserve started raising interest rates in 2022, many financial institutions have responded by offering higher interest rates on money market accounts and certificates of deposit. The national average yield for savings accounts is still just 0.23 percent APY, according to Bankrate’s Feb. 22 weekly survey of institutions but it is possible to find money market accounts paying 3% and higher at many institutions.
Basicbanking.org is a service of Partnership for Financial Equity