Personal finances typically are easier with a bank account, but you might have your reasons for living life without one. It might be a temporary thing while you clear up identity theft issues or problems you’ve had with banks in the past. Maybe you just decided to do without banks altogether. Either way, it’s essential to know how to function bank-free if that is your choice.
Cash and prepaid debit cards are two easy ways to handle most day-to-day transactions and some bills, and some apps and other online services may be helpful for other needs. However, some challenges will be more difficult than others to overcome without a bank account.
Prepaid Debit Cards
Prepaid cards let you do many of the same things that you can do with a debit card tied to a checking account. Instead of having a bank account, however, you load funds onto your card and spend the money that you loaded. There are key differences between prepaid cards and bank accounts worth noting:
- Prepaid cards do not require a minimum balance to open or maintain, but many bank accounts do.
- There are no credit checks on prepaid cards like there are with credit cards. Because they are prepaid, no borrowing is involved.
- ChexSystems and similar services banks use to do background checks on prospective account holders won’t prevent you from opening an account.
- You can’t spend more money than you have on your prepaid card, go into debt using it, or incur overdraft fees as you might with a bank account. However, many cards do charge fees for attempting to make a purchase for more than your available balance.
Some prepaid cards have monthly maintenance charges and other fees, so it is important to read the fine print and make sure the card you choose fits your needs. Common fees include monthly fees, ATM fees, reload fees, decline fees, bill-paying fees, and more. Some cards have different options with their fees depending on the needs of the consumer.
Until society goes cashless, old-fashioned currency is an option for day-to-day expenses. For things like food, gas, transportation, and entertainment, cash typically is an acceptable form of payment. The main drawback is that you need to carry it on you, which can be a safety issue. Plus, if you lose cash, there’s no way to get it back.
There’s also the issue of getting cash in the first place. You can’t withdraw funds from an ATM unless you have a bank account or a loaded prepaid card.
Large bills might seem easier to carry because they are less bulky, but many retailers and service providers do not accept anything larger than a $20 bill for most purchases. Instead, try to get small bills, and buy passes for things like buses or the subway to reduce the amount of cash you need to handle.
Prepaid debit cards can help with most of your everyday spending needs. There certainly are a few places that don’t accept plastic or charge a fee for using a card, but most merchants are happy to take payment with a prepaid card. They’ll probably never know whether it’s a prepaid card or a standard bank-issued debit card. You can spend as much money as you’ve loaded, and if the card is lost or stolen, you can cancel it and get a replacement. If you ever need cash, it’s easy to withdraw funds at an ATM.
Paying Bills Without a Bank Account
Unfortunately, using cash is not always convenient or even possible. Utility companies (gas, water, and electric), phone companies, insurers, and subscription services usually want payment by check, a card, or an ACH transfer from your bank account. Some billers allow you to pay in person, but it’s a burden to make the trip every month during business hours, and it's not practical at all if there is no local office.
If you’re planning to operate with cash only, ask your billers where you can pay in person. Some offer local service centers, while others allow you to pay at national supermarkets and convenience stores by using Western Union agents, for example. If you must mail in a payment, use a money order made payable to the biller instead of cash.
Again, prepaid cards can make things easier and less expensive. Many prepaid cards offer online bill payment. If your biller accepts payments from a credit or debit card, you can just provide the card number instead.
When you get paid with a check but don't have a bank account, you have limited options for cashing it. Your best option might be to take the check to the check writer’s bank. For example, if the check is drawn on an account at Bank of America, take it to a Bank of America branch to cash it. Just be aware that you might have to pay a fee if you’re not an account holder, and the branch might refuse to cash the check.
If you don’t need cash right away—or if you only need a small amount—a prepaid card can come in handy. Most prepaid cards allow you to make mobile deposits to your account by snapping a photo with your phone. Within a few days, you can withdraw those funds at an ATM.
Many retailers provide check-cashing services for a fee, but large retailers like Walmart might waive the fee if you transfer the amount of the check to one of their prepaid store cards. Retailers might also be willing to cash checks for you. Check-cashing stores (often in the same location as payday loan shops) also might be an option, but they’ll probably charge more.
Storing (and Saving)
One thing banks do well is hold money for you. Even if your bank burns down or gets destroyed by a natural disaster, your money should be insured by the FDIC. Credit unions have similar protection. It’s risky to walk around with large amounts of cash or keep all of your money in your home—it could get stolen or burn in a fire. If you’re going to live without banks or prepaid cards, get a fireproof safe and find a good place for installation.
Prepaid cards allow you to safely store money that you load in an account linked to your card. The account might or might not be FDIC-insured, but the money can’t walk away by itself or go up in smoke.
Sending and Receiving Money
If you want to pay friends and family (as opposed to businesses that send you a bill), there’s good and bad news: You’ve got several nonbank options available, but many of those services require a bank account—or at least a prepaid debit card—to operate.
Apps like PayPal, Square, and Venmo often are free for person-to-person payments, but you need a way to fund the payment. For most people, that means linking a bank account to the online service, but a prepaid card often is accepted.
Bill-splitting apps are convenient for settling bills among friends or housemates, but they often need to be linked to P2P apps like PayPal and Venmo.
With some services, you might be able to “load” money into an account by sending a money order, and others allow you to buy cards at retailers to add funds to your account. For example, with the PayPal Cash Card, you can load the card with cash at retailers like Walmart.
Get a Loan
Bank accounts make borrowing easier, but it is possible to get a loan without a bank account.
Lenders often ask for your bank account details when you apply for a loan so they can fund your loan and track where the money goes. Applying without that information throws a wrench in the works. What’s more, even if you get approved, you’ll need to do something with the loan proceeds—either cash the check or store the money in a prepaid account. All of which points to the fact that borrowing is harder without a bank.
Your options for borrowing are limited when you’re unbanked. You’re probably left with less-competitive lenders like payday loan shops and car title lenders. However, fees are notoriously high when you use those sources. Before giving up hope, visit a local credit union or small community bank and ask if you can get a loan. It may take some effort to get approved, but it is not impossible.