By: Kyle Potter
April 18, 2014
Michael St. Amant hasn't had a bank account in six years.
It was drowned out by $65,000 in medical bills stemming from a car wreck in 2008. That was fine, for a while.
But after getting laid off from his job in Seattle in 2010 and coping with his deteriorating health, he hasn't been able to find a foothold. There was a glimmer when he moved to Fargo late last year for a job with John Deere, but a swollen leg - a complication from diabetes - ended that within a week.
Now almost 41, he's been living at Churches United for the Homeless since before the new year.
A bank account could help him turn things around, he said, but no credit union or bank will take him - or, more importantly, his poor credit history. Until then, he's stuck in the world of check-cashing fees, payday loans with sky-high interest rates and carrying cash - all of which, paradoxically, make life more expensive.
"It's a no-win situation," he said.
One in 12 American households didn't have a bank account in 2011, according to a survey by the Federal Deposit Insurance Corp. Many simply choose not to open an account, but it's found predominantly in unemployed and lower-income households: 56 percent of unbanked households made less than $15,000 a year.
It's less prevalent in the Fargo-Moorhead area, where an estimated one in 20 households does not have a checking or savings account, according to the survey. Still, financial counselors and advocates in the region say not having a bank account adds costs and roadblocks, making it harder for St. Amant and others like him to break out of poverty.
"When you don't have a lot of money, you can't do the thing that makes the most sense financially," said Jane Alexander, executive director of Churches United for the Homeless. "It's a huge issue for people who are poor and don't have a lot of credit. I don't know the answer."
Inconvenient and expensive
St. Amant remembers paying $24 every two weeks just to get his own money.
After his bank account was shuttered, he relied on third-party services to cash his checks in Seattle, where he helped paint and assemble Boeing airplane parts until he was laid off.
In addition to the nearly 17 million American adults like St. Amant who don't have a bank account, another 51 million people are underbanked. Underbanked populations have a checking or savings account but used check-cashing services, took out a payday loan or used some other alternative financial service.
In 2012, Americans paid out $89 billion in interest and fees for those services, according to a report from the Office of the Inspector General of the U.S. Postal Service, which is looking into how to help underbanked populations.
In the Fargo-Moorhead area, Wal-Mart charges $3 to cash paychecks or government benefit checks up to $1,000 or $6 for larger checks. Daryn Kapaun charges 3 percent of a check at his Mister Money stores in the metro.
Five years ago, Kapaun said he cashed 75 to 100 checks every day. That's down to 10 to 20 daily now. He attributed the drop to the steady push toward automation.
Last year, the federal government stopped sending paper checks for benefits, opting for direct deposit. Some employers have begun loading up prepaid debit cards for employees rather than issuing written checks, Kapaun said.
With that push toward electronic cash, it's getting harder to not have a bank account. Paying at the pump for gas late at night isn't an option, nor is a hotel room. As Netflix and Redbox have pushed out movie stores, renting a movie almost requires a credit or debit card. And when your wallet is your savings account, losing cash can mean financial ruin.
"It really is inconvenient," said Duane Emmel, a financial counselor at the Village Family Service Center in Fargo who tries to connect unbanked people with an account or other financial resources. "It usually makes it more expensive."
And yet the number of households without a bank account across the nation grew by almost 1 million between 2009 and 2011, according to FDIC surveys. In Fargo-Moorhead, the 5.2 percent of households without an account in 2011 was up from 3.5 percent two years earlier.
Lakes and Prairies Community Action Partnership in Moorhead has connected more than 100 unbanked households in the region with an online debit card this year, said Colleen Murray, director of family and community services.
"I think it's one step in the direction of financial success. It's one of the things that we can build on," Murray said.
Murray and Emmel have heard all kinds of reasons for not having a bank account: people struggling financially, whose accounts have been shut down by debt or purposely closed to avoid high fees.
They both mentioned the metro's growing community of new Americans as a source of unbanked households, either because they don't understand the financial system, Emmel said, or they may not trust it. About 19 percent of foreign-born, non-citizen households surveyed by the FDIC in 2011 had never had a bank account.
Reaching the underserved
The number of unbanked households in the metro may be small compared to the rest of the nation, but advocates and financial counselors like Emmel, Murray and Alexander stressed the importance of trying to connect those households with a bank account - or something like it.
Even a small step, like the debit cards through Lakes and Prairies, can help set those without bank accounts on the right path to start building up savings and a better credit history.
The FDIC itself has called for more outreach to unbanked and underbanked households.
To that end, the U.S. Postal Service released a report earlier this year suggesting post offices could partner with banks to provide some elemental financial services to the underserved, while also boosting revenues for the struggling agency.
Post offices could cash checks, issue reloadable debit cards and maybe even offer small loans, with lower fees than the 100-plus percent interest rates levied by payday lenders.
"The Postal Service could help financial institutions fill the gaps in their efforts to reach the underserved," the report says. "As society becomes increasingly cashless, the Postal Service's ability to provide a physical link to the new digital economy will become more and more vital."
Alexander said she loved that idea, though she joked it may make post office lines even longer. The question of how to help lower-income people without bank accounts has irked her - Churches United for the Homeless has toyed with setting up its own credit union.
"It is so hard for people to get out from under," she said.
After years of treading water, St. Amant sees a path forward. He's worked out a way to pay for surgery next month that his doctors say - and he hopes - will finally solve the health problems that have kept him off the job.
After that, he's focused on getting a new job and rebuilding his credit - a long haul, he acknowledges.
"I just want to get back to work," he said.