Avoiding banks means paying even more fees — along with waiting in lines
The fees were constant: $28 to cash a paycheck. $1.50 for a money order. $1 or more every time I swiped a prepaid cash card. In all, I racked up $93 in fees in a monthlong experiment of living without a bank — $1,100 a year just to spend my own money.
It may be hard to fathom why anyone would live this way, but a federal study last year found that about one in four US households relies on services such as check-cashing and payday loans.
Some believe they don’t have enough money to open a bank account or were burned by fees in the past.
But chronic use of high-fee services may be keeping the country’s poorest from moving up.
To find out what it’s like, I put away my credit and debit cards, suspended direct deposit, and used only cash and things like money orders. Fees, it turns out, were only part of the problem.
■ The costs: I had no idea how expensive it could be. I forked over $56 to cash two paychecks at grimy check-cashing stores. And I was lucky. The check-cashing fee in New York is capped at 1.83 percent. About half of states set no limits.
Most of my remaining costs, about $34, went to fees on prepaid cards. The two cards I used each cost $4.95 — on top of the money I was putting on the card — but came with wildly different terms.
The first card I bought was a NexisCard. I had to pay $1 for each purchase. If I used the PIN code to authorize a purchase, it was $1.50. And if I wanted cash back at the register, it was $1.95.
The second card, from Green Dot Corp., had better terms but charged $4.95 each time I wanted to reload it.
I couldn’t mail cash to my landlord, so I went to Western Union to buy money orders; I needed two for my $1,300 rent. This cost a total of $3.50.
■ The hassles: It was jarring to spend so much time waiting in Soviet-style lines. At the check-cashing place, I squirmed when the clerk counted out my money by snapping each $100 bill high in the air. I felt self-conscious using my temporary prepaid card, which looked cheap, even fake. It didn’t have my name on it. A permanent card wouldn’t arrive for six weeks.
A hotel charged my NexisCard $400 in case I incurred any incidentals. I was told the charge would be refunded at checkout. But it took multiple calls over three weeks to get my money back.
When I was checking the NexisCard account online, I spotted a $3 entry for a “retail reload.’’ I filed a dispute and was told I’d get a call within three days. The call never came. A few days later, another $3 charge appeared. It turns out both “retail reloads’’ were credits for my prior complaints about incorrect fee charges. I learned this only after talking with the CEO. We determined one credit was an error in my favor.
I caught the mistakes only because it was part of my job. Would I have kept chasing a few dollars for much longer? I’m glad I don’t have to find out.
Candice Choi writes for the Associated Press.