Across the globe, approximately 1.7 billion people are classified as unbanked. These individuals don’t have accounts at financial institutions or with a mobile money provider service. Often, they aren’t able to qualify for those accounts. This leaves them at a significant disadvantage. However, there can be alternatives to bank accounts that can help anyone access critical products and services.
Alternatives to Bank Accounts
A bank account alternative is typically a payment mechanism that functions similarly to a checking or savings account. However, they usually aren’t with traditional financial institutions.
For those who don’t qualify for bank accounts. An alternative service is often a necessity. Here’s a look at four alternatives to bank accounts worth considering.
1. Prepaid Cards
Over recent years, prepaid cards have been shifting away from the outrageous fee structures of yesteryear. While the vast majority aren’t free to use, they can be a reasonable alternative to a checking account.
Often, the associated card can be used for a variety of purchases as they often have Visa, Mastercard, American Express, or Discover Card branding. This means any retailer that accepts that payment network allows shoppers to use those prepaid cards. Additionally, they can often be used for online bill payments, which is handy.
In many cases, a prepaid card can be assigned a PIN number. With this, you may be able to get cash back when shopping at select retailers or withdraw money at an ATM.
Some prepaid cards can be set up to accept direct deposits. With these, a person’s wages can be placed straight onto the prepaid card, making it immediately available for use. This adds a layer of convenience some cards don’t offer and might be a necessity for those without a bank account who work for an employer that only uses direct deposit.
If you go this route, make sure to examine a prepaid card’s fee structure before signing up. Some are more expensive than others, so you want to find an option that comes with the right selection of features at the lowest price.
2. Money Centers
Places like the Walmart Money Center can make living without a bank account more manageable. Often, you can get your checks cashed, get money orders for bills, or make certain bill payments onsite. While there are usually fees involved, they are often fairly reasonable.
Just be aware that, while payday lenders may offer similar services, larger retailers may be the most affordable option for these services. However, it’s always wise to shop around before selecting one for your money-related needs.
3. Secured Credit Card
While they aren’t as common as their counterparts, there are secured credit cards available that don’t require the account holder to have a bank account. With these, you pay an upfront deposit that represents your spending limit. The lender holds that money to protect itself in case you default.
Otherwise, the card works like nearly every other credit card. You can use it at any retailer that accepts cards with your branding. However, the limits tend to be very low and the interest rates can be high. Plus, if you are living without a bank account, you need to pay it off in full every month to maintain your purchasing power.
4. Rely on Cash
While it seems like society is becoming cashless, you can still use cash for a variety of everyday expenses. Typically, you can shop, pay utility bills in person, handle transportation expenses, and do similar activities without ever interacting with a bank account.
Since retailers like Walmart or most grocery stores will cash your paychecks, sometimes even at the register, it’s possible to use this approach. However, you may experience instances where cash won’t do, making one of the other alternatives a necessity.
Have you tried a bank account alternative? What was your experience like? Share your thoughts in the comments below.
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