Using cash to manage your money sounds straightforward, but it will end up costing you more money in the long run.
Unbanked individuals, those that do not have any type of bank account, tend to manage their finances solely in cash and rely on alternative financial services such as check cashing centers. According to a 2019 survey conducted by the FDIC, 5.4% of households in the United States are unbanked – that’s 7.1 million households.1 An additional 17.2% of U.S. households (21.3 million) are underbanked, meaning that the household has either a checking or savings accounts, but still relies on alternative financial services.
Black and Hispanic communities are disproportionally impacted by the burden of being unbanked. In fact, the abovementioned FDIC study found that 13.8% of Black households and 12.2% of Hispanic households are unbanked. This is compared to just 2.5% of white households.
In addition to being inconvenient and time-consuming (think of all the hours spent going to a check-cashing center and paying your bills in person with cash!), being unbanked is expensive. In 2019, unbanked and underbanked Americans spent $189 billion in fees and interest in alternative financial products. 2
Getting out of an expensive cash economy can help individuals and families participate and get ahead in today’s economy. Electronic payments provide greater value in buying power, convenience, safety, and financial management. One example of an electronic payment is the use of reloadable Prepaid cards. Prepaid cards don’t require a bank account or having a credit history. Funds are loaded, and reloaded, onto a prepaid card account. The benefits of Prepaid Cards include:
Saving time and money. Payment cards save customers time and money by avoiding a trip to a check-cashing center and paying fees to cash a check. With Prepaid Cards, paychecks can be electronically deposited onto prepaid card accounts, eliminating check cashing centers and fees altogether.
Banking on your card. Use a Prepaid Card to pay bills online or over the phone and save the cost of buying money orders. Many cards come with financial management tools for budgeting and tracking expenses. These tools can be used to track spending and stick to a financial budget. Using cash, in contrast, can make it more difficult to keep records, track expenditure and maintain a budget.
Feeling more secure. Payment cards reduce threats to personal safety associated with obtaining and carrying large amounts of cash. Unlike cash, cards that are lost or stolen can easily be replaced.
Interested in learning more about Prepaid Cards or enhance your financial knowledge? Check out our toolkit for individuals to learn all you need about payment cards, credit scores, and more.
1 Federal Deposit Insurance Company (FDIC). (2019). FDIC National Survey of Unbanked and Underbanked Households. https://economicinclusion.gov/
2 Financial Health Network. (2019). “Financially Underserved Market Size”
