Most of us have bank accounts. Or a bank product, at the very least. Whether it’s a savings account, credit card, checking account, line of credit, or some other service, you more than likely deal with a bank on some level. A lot of business relies on having fast access to our money. We also want to know that our hard-earned funds are secure.
If you live in the United States, having your money in a bank account (or a place with similar tech and security) is easily the safest and most convenient way to manage your funds. With a bank, up to $250,000 of your money is insured by the Federal Deposit Insurance Corporation (FDIC). Banks also offer other services like loans, online banking, direct deposits, automatic bill payments, credit score checks, financial advice, and much more.
However, there are some reasons why you might be uncomfortable with banking as a concept. Any issue at an otherwise trusted bank can lock up funds for an extended period of time. Likewise, not all banking systems are as reliable as the ones in the U.S. It’s possible that you (or your family) have had bad experiences with banks in the past. That might make you reluctant to use them again. Banks also require a lot of personal information to join and maintain an account with. You may be wondering about alternatives to traditional banking for privacy’s sake alone.
Our position is clear: the benefits of banking far outweigh the negatives in always every case. However, if you’re determined to avoid dealing with those financial institutions (for whatever reason), there are some practices you can adopt if you’re looking for alternatives.
First: Consider a Credit Union
If you don’t like the idea of keeping your money in a bank, the next place you should look is a credit union. Full stop.
Credit unions are nonprofit financial institutions that have many of the same security, services, and capabilities as a bank. However, they are not beholden to investors. Since profit and growth are not the priorities of a credit union, they generally don’t charge as much in fees. They also tend to have more generous interest rates for loans, savings accounts, and APYs for CDs.
While credit unions are not insured by the FDIC, they are protected by the National Credit Union Administration (NCUA) for that same $250,000 amount. You do have to be aware of things like membership dues and signup fees —and credit unions are not nearly as ubiquitous as banks. However, if you have access to one, generally speaking they are an equivalent (or superior) option to a traditional bank.
Another notable thing is that not all credit unions require the same level of personal information that traditional banks do. You would need to do some specific research before you join, but a credit union may also be your best bet if privacy is your main concern.
Invest in a Good Safe
Keeping a lot of cash or prepaid cards around your home comes with some fairly substantial risks. Theft can be absolutely catastrophic, but so could an event like a fire. Homeowner’s insurance typically does not cover more than $200 in cash. Depending on how much you have saved, you could end up losing thousands of dollars that would have been perfectly safe in a bank or credit union. Safe deposit boxes may be a slightly more secure alternative, but it’s important to remember that they are usually not insured for large sums of money.
Due to these associated risks, it’s not our position that you should keep large sums of cash in your home or a safe deposit box. However, if you’re determined to (or left with no other choice), putting some of that money into the purchase of a safe can alleviate some of the danger. We encourage you to make sure any safe you purchase is both waterproof and fireproof. We also recommend you buy one large and/or heavy enough that a thief can’t just take it, and figure out how to crack it open on their own time. For supreme security, bolt it to your floor.
Prepaid Cards Will Be a Lifesaver
Not all stores accept cash. If you don’t have a debit or credit card, prepaid cards will help make up for some of the lost convenience. One way to think of prepaid cards is to treat them as halfway between gift cards and debit cards. You load money onto the card much like you would for a gift card. These cards usually come from a large brand like Visa or Mastercard. That meaning your money will be accepted anywhere those cards normally would be. Plus you won’t be bound to any particular store.
However, prepaid cards do come with some additional risks. If your debit card is lost or stolen, it can be cancelled and disconnected from your bank account instantly. If a prepaid card is lost or stolen, you have no way to get that money back. Anyone could use it. It’s just gone. Prepaid cards also tend to come with fees, so make sure you read the fine print. Your effort to avoid paying banking fees might be cancelled out entirely by paying maintenance fees on a reloadable, prepaid Visa card.
However, prepaid cards can make it easier to silo your funds and control spending. Debit cards are still a better option, but prepaid cards to help you set aside certain amounts of money for certain purchases. They are also physically more convenient to carry than large sums of cash.
Find a Place to Cash Checks
One of the major downsides of not having a bank account is not having a convenient way to cash checks. Not being able to cash personal checks (or even your paycheck) can really put a damper on your ability to even access your money, much less save it. However, there are some options.
Some large retailers like Walmart will cash checks for you. Just keep in mind that there are some restrictions. Amounts are usually limited to $5000 — except from January through April, when the limit increases to $7500. Personal checks are typically topped out at $200. They also charge a fee. That can really add up over time if you’re cashing your payroll check there every week. However, they will cash checks directly into a Walmart MoneyCard, their branded prepaid card. So if you’re utilizing that service, it can be a one-stop-shop. Other major retailers might do this as well, but you need to be familiar with their terms and conditions.
You can find other places to cash checks quickly, but it’s often at a premium price. If you’re determined to avoid using the banks, it’s a price you’ll have to accept.
One Final Note…
Many of the same habits that will help you save money with a bank account will help you save money without one. Setting aside a pre-determined amount of your paycheck, coupon clipping, and other tips and tricks will help you build up your assets. However, going without a bank account or credit union completely comes with many risks. We really cannot recommend it unless you have no other option.