Can you imagine paying 10 percent of your paycheck for something that most Americans access for little or nothing?
Many local residents do just that by using high-cost "alternative financial services" such as payday loans or check-cashing services.
When I began working at the Opportunity Council as an AmeriCorps VISTA member in August, I was shocked to find out so many people do not have bank accounts. Honestly, I had never put much thought into getting a checking account. To me, having a bank account was just part of life, like going to the grocery store or commuting to work.
I wondered how my life would be different without an account, something I took for granted. How would I cash my checks? Where would I safely keep my money? How would I pay bills without online bill pay or paper checks?
After discovering many people don't have accounts, one of my first questions was, why do people "choose" not to have accounts? Wouldn't it be easier to have an account?
The truth is a lot of people have either never been exposed to banking services or have had account problems in the past and now are denied an account with many financial institutions.
Regardless of whether people can get a checking account, they still need to pay bills, cash checks and purchase items. The alternative financial service industry has tapped into this need by providing check cashing and pre-paid cards. These services are offered with a limited customer relationship that doesn't require background information.
So, what's the catch? In order to accommodate for having minimal customer information, businesses tag on seemingly insignificant fees such as $3 to cash each check, $3 to load money on a pre-paid card, $1 to have money on your card. Nothing that seems too crazy. But it adds up and can take a huge bite out of someone's limited financial resources.
This winter I worked with a woman in a job-training program at the Opportunity Council and learned she didn't have a bank account. Each week "Joan" went to a store to cash checks and put money on a pre-paid debit card. One day we sat down with a calculator to crunch the numbers and figure out how much she was spending on these services. It turned out she was spending between $70 and $100 per month! Keep in mind this is someone who earned less than $1,000 per month to support herself and her 3-year-old daughter.
She is not alone. Almost 20 percent of Whatcom County residents utilize alternative financial services.
Fortunately for "Joan," and others, there is a new pathway to banking services thanks to 12 financial institutions that stepped up to answer the request of government agencies, human service providers and the Whatcom Asset Building Coalition.
"Bank On North Sound" is a new initiative that provides banking services for people who need a first-time or second-chance account. This group of participating banks and credit unions are offering services to residents of Snohomish, Skagit, Whatcom, Island and San Juan counties. Bank On North Sound is one of eight initiatives in Washington State.
Since the first Bank On initiative launched in San Francisco in 2006, programs have popped up across the country and provided thousands of accounts for people who need an alternative to high-cost and predatory financial services. It makes a difference - especially for people with low incomes.
The Opportunity Council frequently works with clients who fall a little short on monthly bills, causing them to fall into the trap of high-interest payday loans and a continuous cycle of debt. Bank On North Sound has the potential to help people save money and climb out of debt and poverty. People like "Joan."
"Joan" never thought she could access a bank or credit union account again. Now, with her new account, she is using the money she used to spend on fees to help pay for school. By having a bank account she is able to re-enter the mainstream financial world and eventually rebuild her banking and credit history.
For more information on the program, visit the Bank On North Sound website at bankonwashington.org/north-sound or call me at the Opportunity Council at 360-734-5121, extension 232.
ABOUT THE AUTHOR
Brynn Smith is a VISTA member serving at the Opportunity Council developing financial stability programs.