Comment by CocaKoala | Hacker News Reader

Comment by CocaKoala | Hacker News Reader

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First job I had out of college, when it came to payday, my boss handed me a paycheck with pay stub and I folded it up and put it in my pocket. He told me that I was supposed to sign the check and hand it back to him, and then he'd pay me cash for the face value of the check.

He seemed incredulous that I didn't know that immediately; he asked me if I was a trust fund kid and if this was my first job. I told him, a little defensively, that I had held several jobs previously and most of them just used direct deposit.

Apparently all of his other employees had just been taking their paychecks to a check-cashing place, and paying a fee to get cash. If he gave them cash, then they could save the fee on their end and he didn't actually have to keep money in the bank account that handled payroll, which I guess saved him some fees on his end as well.

I definitely asked some pointed questions to figure out if it was a tax dodge, though; it was kind of a sketchy business.

An interesting read I met the other day on check-cashing: http://www.businessinsider.com/check-cashing-stores-good-dea...

That's an interesting article, thanks for sharing it!

"paying a $97.50 fee (and a $10 tip to Servon)"

Tipping on a completely service-less event, when already being ripped off by paying to move money around... I dont understand americans.

We are good hearted and generous.

I can understand a variety of cash usages over credit for fee savings, privacy and getting around transaction limits. But I can't understand why anyone would use a check cashing place. Can you not get a bank account for free in the US? Even my grocery store runs a free banking service here with no minimum - you lose out on some things like teller withdrawal, but they have ATMs everywhere and unlimited debit transactions.

Seems you'd also be interested in this article:

An Ivy League professor who spent 4 months working in a South Bronx check-cashing store says we're getting it all wrong http://www.businessinsider.com/check-cashing-stores-good-dea...

At this point even South Park has commented on it. Yeah, I'm going to pretend comment is the right word:

https://www.youtube.com/watch?v=Maa0K4ycASo

> Can you not get a bank account for free in the US?

If you have good credit (which usually requires a well documented reliable income, and no outstanding unmaintained debt from say, a college education or medical condition), if have the $20 or so to spend to keep the account open and in good standing, if you have the time and patience to make sure you never accidentally overdraw or under-use (so as not to get hit with costly fees).

Then sure, a bank account is "free" in the US.

If any of the above doesn't apply to you, then you might have some troubles. And there are a lot of businesses that exist to take advantage of (typically poor) people who have had troubles with real banks.

I've never had a credit check for a checking account. They used to do these a long time back (and it was totally reasonable), but they don't really anymore.

Yes, account maintenance fees are lame, but there are banks that don't have these. They've only recently become widespread for your typical checking account. Banks are getting more aggressive since the myth that using banks somehow benefits the customer is dead (they no longer pay interest, and mostly just laugh when you complain).

For the other things, yes, if you want use your bank account to pay, you have to make sure it has money in it. Is that some sort of problem? Do you expect a bank account to be a license for free money, or this to just automatically handle itself? I don't get it. You say people want bank accounts but can't get them because they don't have the "time and patience" to manage them? Isn't that a good reason not to give them to them?

We do, in fact, have strict banking regulations and a federally-backed insurance program to protect depositors in mismanaged institutions.

I guess the point is that people always paint the U.S. as if it's some wasteland where we kick the teeth of everyone with a net worth < $1M. That's not the case. On further inspection, as in this thread, you'll find that many (though not all) such complaints are someone attempting to craft a sob story out of the fact that we don't live in a rainbow world where bank accounts magically fill themselves up.

There's a separate, parallel system of checking checks. My credit is in very good shape, but there's a company out there that thinks somebody with my name passed a bad check in a state where I don't reside on a bank account that was no longer open when the transaction was made--indeed, the bank itself no longer existed at the time.

I found this out when I went to try to open a joint account with a business partner and got denied. We ended up opening the account at an institution which I already used, instead.

What about credit unions?

(Genuine question: I don't know if they are any better in that regard, or not.)

Credit unions have similar, maybe slightly lower, standards for opening accounts. They don't want to be stuck with overdrafts either.

I know that credit unions (and banks, for that matter) in my area don't require a high credit score to open an account - I was able to open two accounts - one in a credit union, another one in a bank - while having no credit score whatsoever after arriving to the country. The bank did actually run a credit check on me, and they told be that it basically came up as "no history", which to them is the same as not passed... but they didn't care, so long as I didn't ask them for a credit card.

The credit union that I'm banking with doesn't have a minimum account balance or account fees: https://www.firsttechfed.com/bank/checking/carefree_checking

Am I missing something?

Not missing anything, just not dealing with Wells Fargo/Chase/BoA.

Your experience with local credit unions is the same as mine. If you come in with $100 you can open an account.

The bank referenced above (the one that I was able to open an account for despite not having any credit history) is actually Wells Fargo. Although unlike the credit union, they do have minimum account balance (or account fees).

Anyway, getting back to the original question - if credit unions are indeed much more flexible wrt opening accounts, and not require account fees, why are there so many people without accounts? Is it because some areas simply don't have credit unions?

Banks and credit unions generally use Chexsystems, which is for banking history not the credit score from the three companies you'd usually think of.

Why do you need good credit to open a bank account?

Many of the major banks charge fees if your bank account is below a certain threshold [0], often in the range [$1000,1500] for the required minimum balance. Any balance below that, you typically need direct deposit to avoid the fees.

And banks have a (in the US) deservedly poor reputation amongst the poor.

Less common now (maybe barred now?), banks would take the day's transactions and apply them in an order which deliberately fucked the customers. Let's say your balance is $100, and you get paid $1500 today. But you're living paycheck to paycheck so you delayed bill payments until today. You pay 5 bills, total value of $1000 (you have enough, technically). The banks would order the execution of those transactions to hit you with overage fees for as many of the payments as possible. If you noticed it right away, they'd refund the money with a phone call (and a few hours of your time on hold). Otherwise, you're just out a couple hundred dollars. All your bills will have been paid, but you would have been hit with up to five $25-75 overdraft fees before your deposit was finally processed.

Or how Wells Fargo was creating accounts for people without their consent, resulting in people who had enough money in their accounts suddenly not and being hit with fees and penalties for their trouble.

[0] They'll also change these in the fine print periodically. My free checking was a $1000 minimum with Bank of America. I'd switched to USAA for most things, but they have no physical branches. Occasionally needing a real bank, I left the $1000 in my BoA account, then one month I got hit with a fee. Turned out they'd bumped the minimum to $1500, found the letter and it was indeed small print indicating the change to the small print, buried in 10 or so pages of material about my account.

Using a major bank is a mistake if you are poor. I would say it's a mistake in all cases but especially if you are poor.

Use a local bank or credit union.

It's worse than you think for those with low balances.

Gas stations and some other companies 'susceptible to fraud' Have the ability to withdraw cash before the whole bill goes through. So the swipe has $70 withdrawn, then redeposit it (with a long delay), and then charge your bill. So you end up with multiple overcharges for one transaction if the first withdrawal is too large.

Account features like paying/auto-transfer from savings being disabled if you trigger arbitrary rules.

Normal banks and even most credit unions are purposefully exclusive in policy. Though I imagine a lot of it is "this is just how it's done" than purposeful. Though it does all feel pretty hateful after banking at military banks, since there is a working model right there.

I forgot about the gas station issue, also happens with hotels and rental cars. It's not technically a withdrawal, the money stays there, but it is a hold on your money preventing you from spending it which will cause the overdraft fees when you spend money you think you have (and technically you do) but can't spend because it's been held for a week by a gas station. At times I've tried to go all debit card for spending (as a way to kind of "reset" myself when I've let my spending get out of hand). But gas stations will always go on my CC because of this issue. Local ones here put a $99 hold on my cards, typically, and they usually stay on there for 3-5 days.

if you overdraft your account and owe the bank money or write/cash bad checks you get blackballed by the banks and your name gets put in the chexsystems that all banks use until you pay back the bank you owe. No bank not even a credit union will allow you to open an account until you get your name removed from chexsystems. Many poor people just give up knowing they will never be able to pay off that debt and go without a bank account

if you wanted to dodge taxes, you probably would go straight to cash in this case... checks leave a trail.

The employer was taking the check back immediately in exchange for cash. He may never have cashed those checks, but used a different check or transfer mechanism to repay himself (or the cash could've been the company's to begin with). Handing the checks to the employees, as part of a tax dodge, could've been just enough action to appear legitimate to the people working for him, but the trail could easily end with him since all he had to do was burn those checks afterwards.

Or you'd dummy up some pay stubs and fake checks that no bank would ever cash, then make your employees give the paychecks back to you immediately and pay them face value for their paycheck in cash.

You would get caught immediately when the employees filed their taxes and the IRS had no record of the supposed withholdings.

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