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No more excuses for bank-leery Latinos

By Odysseas Papadimitriou

More than 28% of all U.S. households are either unbanked or underbanked, according to a study from the Federal Deposit Insurance Corporation (FDIC), and Hispanics are among the consumer cohorts that are most likely to operate outside the traditional banking system.

Nearly half of all Hispanic households fit into these categories, and roughly 15% have never even possessed a bank account.

You’ve likely heard mention of such statistics before, but let’s talk about why they’re important as well as which types of financial accounts offer the combination of safety and savings that has proven so vital in the current economic climate.

The Value of a Bank Account
Well, whether you feel that you don’t have enough money to warrant opening a bank account or you simply don’t want one – the two most common rationales for being unbanked, according to the FDIC – though it’s important to understand that banking does have its benefits — include:

Savings Security: The FDIC insures consumer deposits (i.e. the money you put into savings and checking accounts, money market accounts, and/or certificates of deposit) for up to $250,000 per person at each financial institution they do business with. In other words, you won’t lose any money in the event that your particular bank goes out of business. What’s more, banks offer $0 liability guarantees for credit cards, debit cards, and prepaid cards, so you won’t lose any of your hard-earned money even if fraudsters rack up a bunch of unauthorized purchases.

The same obviously cannot be said of cash stowed away under your proverbial mattress. If, for example, someone steals your cold hard dollars or your house burns down, there’s no getting your money back!

Interest Revenue: Sure, interest rates for deposit accounts are rather low these days, but wouldn’t you prefer to see your savings grow by about 1% each year simply because they’re in a bank account than to watch them just sit dormant?

Convenience & Cost: Roughly 52% of Hispanic households use alternative financial services (AFS) like check-cashing stores and payday lenders each month, according to FDIC data. Not only will the right bank account reduce the number of errands you have to run, but it will also save you a lot of money.

No matter what you may think about banks, one thing is clear: Alternative financial services cost a lot more money.

Let’s face it, responsible money management is hard enough when you’re using all of the tools at your disposal and nearly impossible when you’re not.

When you have a bank account, you can easily keep track of spending and payment habits, savings progress, and more by simply logging onto your online account or reviewing your monthly statements.

There are certainly some drawbacks to traditional banking too, but consumers these days also benefit from far better user protections than even just a few years ago. New regulations have drastically improved transparency throughout the personal finance industry and eliminated many of the predatory practices that fostered consumer distrust of banks prior to the Great Recession.

Prepaid Cards: A Palatable Gateway to Traditional Banking

Prepaid cards basically amount to a cross between a debit card and a gift card. In other words, you can buy them at major retailers like Walmart, register them under your name, reload money as needed, and access your funds by making purchases at the point of sale or withdrawing cash from an ATM.

The best prepaid cards also enable you to access your paycheck via direct deposit, cash checks directly into your account, and easily pay all of your monthly bills. You can even automate such transactions for added convenience.

The question is which prepaid cards are best suited to meet the average person’s needs. Well, based on a recent study, the following answers that very question as it relates to people looking for an alternative checking account, a replacement check cashing tool, or a low-risk way to teach their children the basics of money management.

Best Alternative Checking Account – Bluebird Card from Walmart & American Express: This card does not have any fixed service fees and offers free online bill pay, free check loading, and unlimited free ATM withdrawals at more than 23,000 MoneyPass ATM locations nationwide (as long as you’re enrolled in direct deposit).

Best Replacement Check Cashing Tool – Chase Liquid Card: This card will cost you $4.95 per month, but the ability to load funds directly via check and then withdraw cash for free at more than 17,500 Chase ATMs around the country is well worth it when you consider that a check-cashing store will charge you up to 20% just to access your own hard-earned money.

Best Financial Literacy Teaching Tool – KAIKU Visa Prepaid Card: Prepaid cards give young people the opportunity to manage their own money without the threat of credit score damage that is inherent to credit card use, or the possibility of being denied a traditional bank account in the future as a result of overdrafts and bounced checks with a checking account.

With a monthly cost of $1.95, the KAIKU Card is a great low-cost option for this purpose.

At the end of the day, the way you manage your money is entirely up to you, and if you’d prefer to continue operating outside the traditional banking system, that’s fine. But it’s still worth it to at least consider the benefits of having conventional financial products because the system is much safer now than in years past.

Most financial institutions also offer Spanish-language versions of their websites and educational content these days, so a lack of comfort with English is no longer an impediment to sound money management either.

Odysseas Papadimitriou is the founder and CEO of CardHub, a website that helps consumers compare credit cards, prepaid cards, and gift cards as well as improve their financial literacy.

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