This post is long overdue. I came away from the FinX workshop excited to write about my experience, but then life happened.
Thankfully, things are finally settling back to normal — and I finally found the paperwork from the experience. So I’m finally ready to discuss what I learned.
Nothing new, right?
After winning the CFSI’s “What Financial Health Means to Me” contest, I was asked to participate in a FinX workshop. I was told we’d be completing activities to see the costs of being unbanked.
I nearly talked my way out of it. (One of the few benefits of disability is having a Get Out of Jail Free card.) But I remembered how much the organization was paying to get me to FinCon, and I figured it was the least I could do.
So I viewed some clips of interviews with previous participants, rolling my eyes the whole time. How could these people be so surprised? This isn’t new information, and I certainly wasn’t going to learn anything new.
I was completely wrong.
Knowing vs. seeing
We were put in groups, given a list of activities, and sent to a specific part of town — and we had only an hour and 45 minutes. The time crunch was supposed to help simulate the one workers would feel trying to get errands done during lunch breaks or quickly after work.
We started out with a handicap (disability joke!) because our first Uber driver messed up and couldn’t take us. So instead of speeding away in 10 minutes like other groups, it took us closer to 20. And we were down a member because the third guy had a conference call to make.
So it was just the two of us and a variety of tasks looming before us. They seemed simple (and the costs relatively obvious), so I still wasn’t expecting it to be eye-opening.
Again: completely wrong.
First: Get money
Before we could do anything else, we had to cash some checks they’d given us. We were allowed to go anywhere to do it, and there were banks in the area. But I knew banks had complicated rules about cashing checks for non-customers, so we sucked it up and went to a check-cashing place.
Already the sense of urgency was costing us money. (Sorta. I’ll get to that later.)
I cashed an $85 payroll check, and my partner had a $15 personal check. First, we had to give basic information, including our Social Security Numbers, and a thumbprint. I’d done a mystery shop before, so that wasn’t too shocking. Other people in the group were surprised and upset by it.
Once that was out of the way, we got our money. Despite the vast difference in amounts, both he and I paid $2.50. While I lost less than 3% of my check’s value. He lost 17%.
His teller actually asked why he didn’t cash it at the issuing bank. Another employee told her he’d be charged $5 there. She was wrong in two ways:
- Wells Fargo charges $7.50 to cash its own checks if you’re not a customer. (Chase charges $8 in case you care.)
- Two groups got the fee waived (one without even asking), but at least other one didn’t.
At any rate, our duo left with $95 out of the $100 we were given.
Second: Buy a prepaid card
We had to buy a reloadable $10 card. We actually had to go to two places. CVS only had $20 ones — which, by the way, were $1 less to activate than the $10 one we bought.
So out of $100 in checks, we now had $81 in cash and $10 on a card.
At any rate, we had the card (for better or worse) and then had to activate it. Supposedly, you could do it online, but my companion ended up having to call in because the website kept refusing to accept his address. He spent about five minutes getting that set up.
One of the other groups also couldn’t get it done online. Their card company charged 50 cents for the interaction, meaning they spent $4.45 to buy and activate a $10 card.
Third: Use the card
Next up, load more money. Specifically, we were told to put at least $10 more on the card. Thank goodness for the “or more” because the company that sold us a $10 card had a $20 minimum for reloads.
There was nothing to do but fork over $20. Well, $24 after the loading fee. Yep, we paid $4 for the privilege of adding money to a card so that we could spend it.
Total left: $57.00 in cash, $30 on the card
The next task was to use the card to buy a gift. Being in a hurry, we just looked around the CVS and chose a $15 iTunes GC. For which we were charged $17. Because apparently our card charges $2 to run it as credit. But hey, it’d have been $3 to use it as debit, so I guess we got a deal. It turns out that the only free way to access our money was via ATM withdrawals.
If you’re wondering, I reviewed the minuscule print of the card’s accompanying instructions — instructions which, of course, weren’t visible before you bought the card. I had to scan it four times to find the fee information. Yeah.
Total left: $57.00 in cash, $13 on the card, $15 GC.
Fourth: Cash transactions
Eager to avoid any further card fees, we paid in cash for “groceries” for the family. We were limited to $10, so it wasn’t exactly indicative of a real trip. And we didn’t see a grocery store nearby. So we once again stuck to CVS and paid a bit over $3 for some water and candy.
We were given a statement showing a $10 utility bill balance. We went to 7-11 and paid it there using PayNearMe, which I’d never heard of. Miraculously, there were no fees.
Total left: $54 in cash, $13 on the card, $15 GC.
The end result (hypothetically)
In order to be back by the exact time (there was a penalty if we weren’t), we had to cut and run long before our tasks were done.
We would have completed more if we weren’t so harried about time. (Which is arguably a perfect simulation for someone trying to get chores done on their lunch break.) Being so worried about wasting time, we didn’t realize that several items on the list could be completed at the same store.
That’s why we ended up making two trips to 7-11: once for the prepaid card, once to pay the utility bill. It turns out there were two more tasks we could have done there, too: a $20 money order and a $30 money transfer. (Arguably, we could also have gotten the money order while cashing our checks.) For example, we wasted time by forgetting to pay the utility bill while at the 7-11 for the prepaid card.
We almost got the money transfer done, but I was worried that we’d run out of time before being able to pick it up.
And apparently my concern wasn’t completely unfounded. One group tried to pick up the money only to be told it had to be done in a different zip code than it was sent. Luckily, San Diego zip codes are pretty close together, so they just went a few blocks over and got the funds.
At any rate, had we finished the fee-based tasks, our $100 worth of checks would have become:
- A $15 iTunes GC
- A paid $10 utility bill
- A $20 money order
- A prepaid card with $13 on it (that charges $2-3 per use)
- $31 in cash (after $4.99 for the money transfer, $1 for the money order)
And just in case you were keeping score, results varied wildly.
For reloadable cards, one group gave up and just got a $20 card. One or two got cards that didn’t have the $20 minimum for reloads. Two had cards with fees vastly better than ours.
For the checks, two groups (including ours) paid $5 to check both checks. One group paid $16 by going to the bank. The other two avoided any fees at all thanks to the utterly unpredictable generosity of customer service. that two other ones avoided.
And of course, one group came close to having $30 floating in the Western Union ether.
This is insane
I thought I understood how expensive it was to be unbanked. Plenty of Tim’s friends from Tacoma didn’t have accounts (or great financial habits). One once told me that her and her husband’s Christmas presents included getting some things out of hock.
But they don’t talk about the hassle involved in a life without a checking account. Because they take for granted the fact that they’re paying for the privilege of both adding money to a card and actually using it.
They’re used to having to buy multiple money orders for rent, each utility bill, etc. That, or take the time and energy to visit every company they use (electric, gas, cable, Internet, etc.) and pay in cash. And that they’ll have to pay for the privilege of prepaid cards.
That’s an exhausting proposition. Most of the participants looked weary, disheartened or astonished — or some mixture of the three.
As we shared our experiences, the majority of people said they were surprised at the level of distrust they encountered. It was hard not to take it personally.
And it’s not as though we went into this blindly. Most of us knew abstractly about these factors. But being confronted with them — especially one after the other — is jarring. It gave us a real insight into how so many people in this country live, day in and day out.
As of 2015, the FDIC found about 9 million Americans were completely unbanked. Another 24.5 million had at least one traditional bank account, but still used some financial products or services outside that system.
That means almost 27% of Americans regularly deal with some or all of the obstacles that we workshop folks could barely stand for a few hours.
I’m sure there are more profound things to say about the situation, but I still find it mind-boggling. So all I can say that this is insane and it needs to change.
Is it too late?
People are working to educate consumers and lobbying for legislation that will better protect them. But frankly, I think it’s too late for the majority of the adult unbanked.
I’m not saying we should stop trying to reach them. But I fear that too many have been burned and aren’t willing to risk it again. As the old saying goes, better the devil you know than the one that charged you $30 each time you accidentally overspent.
I think our best bet to focus mainly on the younger generations. Increase financial education in schools so that the kids are less likely to inherit their parents’ mistrust of the banking institutions. Or at least boil it down to a healthier level of skepticism, one that will keep them away from overdraft protection and push them toward daily bank app usage to keep an eye on their current account balances.
What do you guys think? Is it too late to regain the current generations’ trust? Did this tale startle you, or is it old news?
A long P.S.
Another unfinished task was to visit a bank and find out the requirements for a free checking account (including free checks). For the sake of argument, I looked it up online before writing this post. Here’s what the three banks in the area offered:
Chase: Only offers this if the account is linked to your Chase mortgage (with automatic payments set up) or you have a daily balance of $15,000. But hey, it earns 0.01% interest!
Union Bank: You need an average daily balance of $1,500 or keep $5,000 across all your Union Bank accounts or have $500 deposited by direct or mobile deposits.
Comerica: You need a $5,000 daily balance or keep $7,500 over four accounts (including IRAs and CDs).