According to a new Federal Deposit Insurance Corporation report 25 million Americans were unbanked in 2013 — they had no bank account at all. Another 68 million are “underbanked” and rely on all sorts of alternative financial services outlines in this terrific NYTimes article.
Check cashers and payday lenders charge high fees, too — in New York State, 1.98 percent of the face value of a check to cash it, and an annual percentage rate, or A.P.R., of between 200 and 500 percent for a 14-day loan. But a money order at RiteCheck costs less than it does at the post office. And if you think of a bank account overdraft as a short-term loan, a seven-day loan would have an A.P.R. of over 5,000 percent. People pay these fees because they have few options, and because they need their money as soon as they can get it. When I asked customers at Check Center and RiteCheck how they saved money, one interesting alternative I heard about, particularly from Latino immigrants, was rotating savings and credit associations — informal groups that community members start themselves. These consist of 10 to 15 people who each contribute the same amount of money every week to a pool; one member gets the entire pot each week. One young man from Mexico told me he had a Chase account, but preferred to save in a group organized by the mother of a friend with whom he plays soccer.