The cost of opting out of a bank account

The agency found that the households of minorities, young people, the unemployed and those with lower-income were the least likely to have an account. The most common reason for not having a bank account was that people felt they either didn’t have enough money for an account, or they did not need or want one, the study found. Households that previously had an account were less likely to say that they did not need or want one, compared with those that never had one.

Given the continuing sluggishness of the economy, the persistent unemployment rate, and the controversy we’ve seen over the past year regarding rising bank fees, it’s not surprising to see people choosing to opt out of the system. There’s a wariness among many consumers, who worry about falling prey to predatory practices.

“Our concern is that when people are moved from ‘unbanked’ to banking status, they are put into good products, which means no high overdraft fees or payday lending structures,” said Kathleen Day, a spokeswoman at the Center for Responsible Lending, an advocacy group in Washington DC.

That’s a fair worry but don’t let fear be a complete deterrent. Those individuals who are choosing not to use bank accounts should make sure they’re thinking through the consequences of their decision: They may actually be hurting their wallet more, and inadvertently letting slip the advantage of other available services.

It’s no secret that rising bank fees have left people sick of being nickeled and dimed for every transaction. Here in Massachusetts, though, we have one advantage over some other regions of our country: we have options.

Bruce Spitzer of the Massachusetts Bankers Association points out that consumers can benefit from the wide variety of banking institutions operating in this state, many of whom are trying to differentiate themselves by not charging fees.

“We still have 185 banks here in Massachusetts, large, small and midsize,” he said. “There’s plenty of choice for consumers and opportunities to shop around. There’s power in that.”

In many cases it’s possible in Massachusetts to open a basic checking account at a monthly fee that is lower than the cost of loading up a prepaid debit card – a financial service commonly used by the un- or under-banked. In fact, the savings can start to quickly add up since people who frequently use prepaid cards often add funds several times a month, and pay a fee each time, Spitzer said.

Avoiding bank accounts may also result in losing out on an opportunity to access credit. Demonstrating that you can save, and build a banking history, leads to other opportunities for credit.

Here are some other tips, and points to consider:

1. Take advantage of the variety of banks available in Massachusetts. Shop around and learn about the services so that you can find an institution that meets your needs.

2. Make sure you use a financial institution that offers government (FDIC) insurance. You have access to up to $250,000 of insurance for deposit accounts at each institution at which you bank.

3. Ask about overdraft fees. You want to be clear about the cost of exceeding your balance as these expenses can add up quickly.

4. If you have a limited budget, and funds, don’t use a debit card. That way, you avoid overspending at the store, and avoid overdraft fees from exceeding your bank balance. By the same token, be careful about writing checks. Try to use cash so that you can keep a close eye on your balance as you build up a financial cushion.

5. Don’t be shy about asking for help from your bank if you want to learn how to manage your finances better – from how to keep receipts organized to how to balance your checking account and keep a register. Traditional banks are often willing to help.

6. Avoid using check-cashing services in stores. Use direct deposit into a bank account instead. That way, you’re less likely to use the money on impulse buys, and can instead put together a spending plan and a budget.

And don’t discount the sense of accomplishment that can come with seeing money accumulate in a savings account. “That builds good habits that can lead to more good financial habits,” Spitzer said.