Is a Bank Account Worthwhile for Poor People

In todays society it is hard to get by without a bank account. Most employers prefer to direct deposit, and this is a quicker, easier way to access your funds. It’s easier to pay bills if you have a debit/check card. If you don’t have a checking account to cash checks against you often end up paying a large fee at banks or check cashing companies.

While I would suggest having a bank account for people with low-income, I do have suggestions on how to manage the account.

For starters – if you have a very low income or trouble managing your finances, it may be better to keep a savings account. With this you don’t run a high risk of receiving overdraft charges. Do keep in mind that there are a limited number of withdrawal you can make per month and also there may be minimum balance requirements that result in fees.

If you do open a checking account, it can be best to continue paying your bills with cash or money orders if you have trouble managing your money. This will also help stop you from bouncing checks. If you only need the account for check cashing purposes, keep enough funds in the account to cover your check (most banks will not cash a check unless you have the same amount of money in your account to cover the item). If this is your situation, then it would be best to not order checks or a debit card.

You should choose a checking account that is free of any monthly fees. You have to read the fine print. It may be a free account but there may be charges for additional products and services. You will probably pay a service charge from you bank and the other bank for using an atm through a differnt bank. You will normally have to pay for your checks. Other atm fees can include checking your balance and ordering a min-statement. There is usually a charge for speaking to a representative over the phone as well as requesting research or check copies. Most banks offer free online banking. You should take advantage of this service to help avoid those charges.

Checks – although it takes checks longer to clear, you will usually fare better than with a debit card. It is very important to keep a check register, which is easier to manage with checks. (Again, any bills you can pay locally, it may be better to do so and only mail out checks to companies outside your local area). A disadvantage to checks is that they can get lost easily through the mail. This can result in additional fees from the biller, as well as potential overdraft fees if you don’t realize the item has not cleared.

Debit cards – Debit cards can cause problems for most people even those with a higher income. They are more convenient and great to have if you need to access your funds in an emergency. They also account for many overdraft fees. When you are on a fixed-income you simply can not afford overdraft fees. It is very easy to overlook something or forget a charge that you have made. Keep a check register! Even then you may still make a mistake. If you only need the card to access your account, i would suggest getting an atm card instead of a debit card. That way you can only pull cash from an atm. Again, be careful here that you are keeping an accurate register, if the bank has not processed an item you could be able to pull out more money than you actually have if you are checking your account balance through the atm.

If you choose to use a debit card, use it sparingly. It may be best to only use it to pay bills. You should still take your spending money out of the bank or atm and use cash.

The most important thing for anyone to remember with your bank account is to keep an accurate up to date record of your transactions including any fees you may have incurred.

Keep in mind that banking is a privelege. You normally have to pass a credit check. It is very important to manage your account.