Checking accounts are a core tool in your personal finances, but many Americans live without one. According to the FDIC, about 7% of Americans do not have a checking account. However, there are two ways to go without a checking account. First are the unbanked and underbanked who live in a cash economy. Second are the super high-tech workers who prefer digital wallets and cryptocurrencies like Bitcoin. So is the checking account dead, or are these people dead wrong about the current state of banking in the United States?
Problem with the unbanked
Living in a totally cash world can work in some cases, but it is bad for both the user and society as a whole. Cash based payroll is often used to avoid taxes, and can help people live off the radar of businesses and government institutions. Privacy concerns aside, this hurts all of us. If millions of people are paid in cash and skip out on taxes, that hurts all of us who do pay taxes and follow the rules.
Further, the unbanked do not have access to the same financial services as the rest of us and likely pay a lot more because of it in many cases. For example, if you don’t have a bank, you don’t have a credit card. With no credit, you pay more when you need to borrow and have very few options. You could be stuck with payday loans. Additionally, going without any debit or credit card means you can’t shop online, which can offer big savings compared to brick and mortar stores.
Digital wallets are a partial solution
Digital wallets have grown in popularity, ease-of-use, and acceptance for payments. You can walk into thousands of grocery stores, convenience stores, drug stores, and other retailers and tap your phone on the terminal to pay from a digital wallet instead of paying with cash or a traditional card. This payment option is likely to only grow in popularity over time, so get used to paying with your phone if you have not tried it already.
Digital wallets fill an important role. For many unbanked, this is an option to enter the digital financial system and make some online purchases. In places like India, this could be the primary answer to the almost 100% cash economy. But digital wallets are not mature enough just yet to be a total solution. In 2017, we still need a checking account to link to our digital wallets, contribute funds, and withdraw.
You still need a checking account
Living in America without a checking account today is a mistake. There are extensive options for free checking accounts, and the ability to get paid via direct deposit, pay bills digitally, and more make a checking account an important and useful tool. As long as you have a Social Security Number, you can get a bank account. NerdWallet offers a tool to help you find the best account for your needs here.
I use my checking account for something almost every day. I get paid in a business checking account, and pay myself into a personal checking account. I pay credit cards and other bills using my checking account bill pay. On the rare occasion I need cash, I go to the ATM which pulls cash from my checking account (thanks to my Schwab Bank checking, I never pay any ATM fees anywhere in the world). I pay taxes with my checking account, and have received tax refunds in my checking. I cannot imagine living without it.
How to use a checking account
You should use a checking account as a clearinghouse for all of your financial transactions. You can still use cash, but it is not as safe as other payment methods. Credit cards are the best way to save, as you can earn rewards and get protection from fraud and other account theft that is not possible with cash or debit. But how you pay is up to you. Debit cards are the most popular payment method for most Americans today.
To get the best from your checking, use one account and use it for everything. All income should go into your checking, and all expenses should ultimately come from this account as well, even if there is an intermediary credit card or digital wallet in the middle. This helps you track your spending, keep a budget, and lower transaction costs. You can even connect to free budgeting apps to automate your budget tracking and money management.
Your checking account should be easy to use
Checking accounts should not be something that make you shudder. If you use it and manage it right, you never have to pay a cent in fees or charges for using a checking account. It just hums along and helps you hold your money and put it where it needs to go at the right time. Checking accounts are not dead. They are still going strong for 2017 and beyond.