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Comment by mumblemumble | Hacker News Reader

It was explained better in the (otherwise less informative) BoingBoing article that this originally linked to: Direct deposit is an option, but not everyone takes that option.

There are a lot more unbanked people than I think most folks who occupy the more stable corners of the economy realize. All those private businesses that prominently advertise check cashing services littered about major cities? Those signs aren't archaic leftovers from the 1970s; that's still a useful service that a lot of people use.

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Why is that? I assume operating a bank account can't be that expensive for banks. If they don't let customers withdraw past zero, they don't really have risks, but they could still take a fee. Is there some regulation that makes it unprofitable? Are people okay not having a bank account and don't bother getting one because paying rent in cash is accepted?

People are unbanked for various reasons. Banks are not well optimized for those of lower socioeconomic conditions (and in fact don’t really want them as customers). Here are a few examples where banks fail them:

1. Speedy access to money When you deposit a check into a bank account, you have to wait a few days before the cash is accessible. Many people live paycheck to paycheck and they cannot wait. Hence check-cashing services.

2. Overdraft fees These are incredibly regressive - punishing those who have low funds. Some banks were caught with predatory behavior - rearranging transactions in a day so the largest hit first and they could trigger multiple overdraft fees (since it is per-transaction) until laws were passed to prevent this behavior.

3. Other hidden fees (low-balance, etc) that aren’t very transparent and really painful when every dollar counts.

Not to mention cultural issues etc. Long-story short, there is a reason people use check-cashing services even though at face value they seem a worse deal than traditional banks.

(Source: was VP of ENG at Credit Karma)

Those and other reasons make absolute sense, but I would imagine somebody to offer basic banking to the unbanked with a reasonable fee structure etc and just take the market. Germany's banking system is terribly customer hostile, but we've got that covered. The US is the motherland of disrupting old industries, why is it that it's not sorted out yet?

I get why some old self-important bank does not want to deal with the poor and makes faces if you suggest it, but somebody has to yell pecunia non olet and jump int.

> When you deposit a check into a bank account,

Why do cheques still exist? We haven't had them here in Norway for twenty years.

I would add that that, when you don't have a lot of money to work with, operating on a cash basis makes controlling your budget a lot easier.

I don't think it's less banks denying them from getting an account, and more banks making it it cost prohibitive to have an account. The ones that come to mind are minimum balance requirements and getting "fined" if you make a mistake (eg. NSF fees).

That's really weird. Her in Norway (and Scandinavia generally I believe) I never pay my bank any fees. There are no minimum balance requirements. I also have a bank account in the UK and that is pretty similar. It only costs me if I go into the red.

I have a family member who works at a bank and has been having to field some of these situations. This is all anecdotal, but at least should help fill out some of the possible situations.

+ A fair amount of people have savings accounts and nothing else. They don't have a debit card and don't use that account with any regularity.

+ There are also some folks who have checking accounts but don't have or don't want to use debit cards. I don't fully understand the why, it sounds like this mostly older folks who don't trust them.

+ There are some access issues with banks. Most banks still want you to be in person for opening an account, and you need to be in person if you want to get cash. For some folks who aren't very mobile, most local banks don't have enough branches.

+ There are some people who really struggle with the paperwork. It's not a difficult form especially for the bank in particular I'm using a reference and the bank tellers will help you fill the form out (it's a page with your name and address, and your social security number basically) but that's enough of a hurdle it precludes some people. Some of the information that's collected here is required by the feds to limit moneylaundering, it's not just the bank.

I suspect it happens but have not heard of any cases of fees being directly the cause. I know I've had a few conversations where someone was surprised to find out you can do banking without fees, didn't understand it was possible to ask for a rate schedule, didn't understand ATM networks, etc. I suspect there's a financial literacy gap that's a cause here (and many subpar banks being fee happy).

> Are people okay not having a bank account and don't bother getting one because paying rent in cash is accepted?

It largely is expensive and annoying to not have a bank account. Typically what keeps people from having a bank account is being in poverty: bad credit, no permanent address, dodging debt collectors, and probably a lot more reasons than that.

Yeah, I don't think people understand how expensive it is to be in poverty (overdraft fees, etc.). For some, it makes more sense to use check cashing than struggle with low bank account fees.

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