Bank Account Alternatives for Dummies

A bank account, while it makes life considerably easier, isn’t necessary. Whether it’s from lack of time, experience, or trust, there are ways to skirt away from bank accounts.

Prepaid Debit Cards

Prepaid debit cards are bank account-less reloadable debit cards.

The main difference between prepaid cards and bank debit cards is the unnecessity of a bank account. You can get these cards from banks, credit card companies, or most retail stores.

Credit cards give you the responsibility of spending money you don’t have. This legally binds you to owe this from the bank with interest, which pre-paying makes impossible.

Meanwhile, a prepaid card only lets you use what was deposited. Once you used all the money in the card, it’s now unusable.

With no bank account, you don’t need to qualify for a prepaid card, since you won’t get to borrow money. This is perfect for those who have unideal credit scores or for those who don’t want to gain debt.

However, no bank accounts might mean less security for your card. Frauds can easily use your card, and the company you work in can go bankrupt.

Prepaid cards might not be insured, which makes it harder to spend money prepaid cards can’t offer. The card eliminates your ability to borrow money with limited transactions and expiration dates.

Loans

If you only have a prepaid card while it doesn’t have much money left, you can get a loan without a bank account. However, this makes it hard for most lenders to manage and track.

Applying for loans can get complicated without a bank account, but it’s not impossible. You’ll need to cash the check or store the loan proceeds in your prepaid account.

Loans like payday loans and car title lenders, while unbanked, require high fees. However, there are local credit unions or small community banks that offer less competitive loans compared to banks.

Auto dealers use your loaned vehicle as security for when you don’t pay it in an agreed period of time.

Cash

The most dangerous choice is carrying cash wherever you go. This is always an acceptable form of payment for everyday spending, but once you lose it, you’re done for.

However, take note that most companies require a bank account or a loaded prepaid card to get your paycheck. Good luck with trying to get your biweekly pay in cash.

In addition to that, utility companies, phone companies, insurers, and subscription services usually don’t accept cash. While some of these billers accept cash, there could be a long ride to each branch for monthly payments.

For some of these billers, paying in cash may require specific stations for personal transactions. Otherwise, you can use a money order for mailing payments as a cash alternative.

Deposit Checks

If you don’t want the dangers of cash and the temptation of bank accounts, you can get deposit checks. Through this, you can deposit funds without having to hold cash wherever you go.

To withdraw cash from deposits, those without bank accounts sometimes have to pay fees for them. Certain banks refuse to cash checks if you don’t have one.

Some retailers can cash checks for you, but using them as representatives can lead to problems.

Money Order

Money orders are check alternatives used to make important payments. These prepaid paper documents are safer than cash, but more deceitful than regular paychecks.

As prepaid implies, there’s no way to get the money order without paying for it first. To get money orders, you should transfer guaranteed funds to a debit card, checking, or savings account.

Afterward, tell the issuer how much you paid for them to print the money order. For more secure transactions, you should specify who you should specify the receiver.

Checks contain sensitive information like addresses and phone numbers, but money orders hide it from those you might not trust.

Whether you have a bank account or not, some retailers may demand money orders for transactions. Money orders are less popular than cashier checks due to lower costs and more locations to purchase money orders.

Safety Measures that Don’t Involve Bank Accounts

Prepaid cards, prepaid cards, prepaid cards. You’ll hear this plastic-encased option most often as the ultimate bank account alternative.

However, its safety (along with all the other options) will always be more questionable than a bank account.

For worst-case scenarios, you should get your money insured by the Federal Deposit Insurance Corporation. This way, they can cover burned or stolen cash for up to $250,000 per bank.

Credit unions have similar protections and coverage.