Negro, Open a Damn Checking Account
More than a fifth of black households don't have a checking or savings account
The views expressed in this Op-Ed do not reflect that of Loop 21.
When Chase rolled out its brand new Liquid Card earlier this month to mass fanfare I had to slap my forehead in disgust. The card offers all the features of a free checking account, except without the checking account; and it’s not free.
Perhaps it was the card’s warm response that got President Obama’s newly-created Consumer Financial Protection Bureau to realize this $57 billion business – that’s set to expand to $167 billion by 2014 – may have to be regulated to keep more Americans from forking over more of their hard-earned cash.
I’ve never understood why so many of our people insist on wasting their money on nonsense. One of the single greatest examples of this phenomenon I’ve ever seen is prepaid debit cards and check-cashing establishments. Using these tools is literally like putting your money in a pile and lighting it on fire. It’s gotten absolutely out of control.
I read recently in the New York Times that more than a fifth of black households (21.7 percent to be exact) don’t have a checking or savings account. This is only true for 3.3 percent of white households. It’s time to smarten up.
Some people may have been fooled by the recent onslaught of “low-cost alternative” debit cards and check-cashing services, but at no point does “low-cost” cost less than free. While cards like the Rush Card and the Chase Liquid card advertise themselves as easy and convenient alternatives to a debit card, all they really are is an easy, convenient way to give your money away.
[ALSO READ: Black Borrowers Face Discrimination]
It’s true that some banks like Wells Fargo are eliminating free checking accounts, but many of the other national banks and most small and community banks still offer free checking accounts with all the fix-ins. In fact, 45 percent of all banks have free checking accounts, according to Bankrate.com. Compare that to 0 percent of prepaid credit cards that offer their services for free with no strings attached.
The Rush Card, for example, requires you to pay a fee just to get the card that ranges from $3.95 to $14.95. You also pay between $5.95 and $9.95 every month whether you use it or not. They call that a maintenance fee.
Then there are the check-cashing places and other so-called fringe banking institutions. Those thieves made a killing to the tune of about $5.5 billion last year by charging between 2 and 3.5 percent interest on the $78 billion in transactions they performed.
In New York, for example, it costs $18.60 to cash a $1,000 check and $93 for a $5,000 check in a check-cashing store. Those rates are set by the State Superintendent of Banks. If you have a checking account it costs $0 and $0.
[ALSO READ: Millionaires On Food Stamps]
Even if you got a checking account that did charge you a monthly fee, you’d still be saving money, according to senior financial analysts at Bankrate.com. They found that banks that aren’t free charge an average of $4.37 a month. It’s not free, but it’s still not even half the average $9.28 per month you'll spend for transactions in a typical month without an account.
The Federal Reserve found in its research that check-cashing and bill-paying services would cost an average $20,000-income household between $86 and $500 per year, while the exact same services at a bank would cost only $30 to $60. Over the course of 10 years that’s a difference of $560 to $4,400. And imagine how much money you’re losing if you make more than $20,000 a year.
When you fall into the “alternative banking” trap not only are you paying more money, you’re missing out on all the services banks offer. Checking accounts generally come with free check cashing, free online bill pay, free access to ATMs, free savings accounts, free debit cards and more. There are even checking accounts for people with terrible credit.
It’s your money; stop wasting it on money orders, check cashing, debit cards and everything else you can get for free.