Chapter 4. What happens if you don't use a bank or a credit union?

Can you still conduct financial transactions without having a bank or a credit union account? Of course you can, but your life would be more difficult and managing your wealth more daunting. It also depends if your decision to disconnect from the financial system is a temporary situation or a notion to indefinitely live off the grid! A temporary disconnect can be managed by relying on cash, prepaid debit cards, payday loans or similar limited financial services. However, if you decide to be unbanked or underbanked, be prepared to face serious challenges in managing your money not to mention hindering building assets and managing your wealth. Choices and options are limited and accompanied by the risk of loss, theft or paying unnecessary fees to conduct financial transactions. 

 

How to

Here is a list of possible challenges and limitations for individuals who are unbanked or even underbanked:

 

 

Day-to-day expenses

• • Use of cash to buy food, gas and other items is acceptable in most places, but cash must be safeguarded against theft or loss.
    • You can always use a prepaid debit card in places that accept them

Paying bills without an account

• • Most vendors require payments by checks or credit cards such as utility and phone companies
    • A few will allow a cash payment if delivered in person during work hours
    • Other places might accept Western Union or money orders which can be purchased for a fee

Cashing payroll checks

• • A payday loan, a mom and pop, a retail or a grocery store might offer a check cashing service for a fee accompanied by the inherent risk of carrying cash

Insuring your money

• • A great function of having a bank account is safeguarding your money
  • Banks and Credit Unions are insured, but cash in your house or in your pocket is not

Borrowing loans

• • A very difficult task without a bank account unless you are willing to borrow a payday loan also known as "shark loan" with high interest or a car title loan against your vehicle
    • This makes qualifying for a business or a mortgage loan totally out of the question

 

Practice

Banking is a fundamental pillar of being financially literate. It is functioning within an economic system that provides society with a structure to exchange services and financial transactions. It's the first step in mapping your financial security/freedom and safeguarding your money and wealth. Now that you know your options, limitations and challenges of what happens if you don't use a bank or a credit union, think of paying it forward and discuss your experience or the experience of someone you know with a friend or a family member.

 

Congratulations! You can move on to Chapter 5. Tips and ways for students to get most of the banking experience.

To review the full module on Banking, click here.