Why people operate without a bank account
Not having a bank account is common. About 5.4% of U.S. households are unbanked — meaning no one in the household has a checking or savings account at a bank or credit union. Another 18.5% are underbanked, meaning they have an account but also rely on other ways to move money because the account doesn't meet their needs.
The reasons vary. Some people have had accounts closed due to overdrafts or unpaid fees. Others live in areas with few bank branches nearby. Some distrust banks after past problems. Some have no fixed address, which banks require. Others simply find the fees too high or the minimum balances too steep. Immigrants without a Social Security number face barriers. People with criminal records or poor credit histories may be turned down.
The result is the same: they pay bills, receive paychecks, and move money without a traditional bank account.
Key Takeaways
- Unbanked people receive paychecks through check-cashing services, payroll cards, or cash, each with different fees and timing.
- Bills get paid through money orders, prepaid cards, online bill pay services, or cash delivery to landlords and utilities.
- Money transfers happen via wire transfers, peer-to-peer apps, or informal methods, with costs ranging from free to $15 per transaction.
- Without a bank account, emergency savings are harder to protect and borrowing money becomes more expensive.
- Prepaid cards and check-cashing accounts offer some banking functions without requiring a traditional bank account.
How paychecks reach someone without a bank account
An employer can still pay someone without a bank account, but the method changes. The most common routes are a physical paycheck, a payroll card, or cash.
A physical paycheck requires cashing. The person takes it to a check-cashing service, which charges a fee — typically 1% to 3% of the check amount, though some charge a flat fee of $3 to $10. The service verifies the check, deducts the fee, and hands over cash. This takes minutes but costs money every payday. Some employers offer payroll cards instead — a prepaid debit card loaded with the paycheck amount. The card works like a debit card at ATMs and stores, but may charge fees for ATM withdrawals outside the card's network, balance inquiries, or monthly maintenance.
A few employers still pay in cash, though this is rare. When it happens, there is no fee, but the person has no record of the transaction and no protection if the cash is lost or stolen.
Paying bills without a bank account
Bills still need to be paid. Without a bank account, the methods are slower and often more expensive.
Money orders are the traditional route. The person buys a money order at a grocery store, post office, or check-cashing service for a fee of $1 to $5, writes the payee's name on it, and mails it. The utility or landlord receives it in 3 to 7 business days. This works but requires planning ahead and costs money per bill.
Prepaid cards
Online bill pay servicesCash delivery
Receiving and sending money without a bank account
Peer-to-peer transfers, refunds, and money from family all need a destination when there is no bank account.
Peer-to-peer apps
Wire transfers
Tax refunds
The costs of being unbanked
Every transaction costs money. A person who cashes a $1,500 paycheck at 2% pays $30. If they pay four bills with money orders at $2 each, that is $8. A wire transfer to send money to family costs $15. Over a month, these fees add up to $50 to $100 or more.
Beyond fees, there are other costs. Without a bank account, the person cannot build credit history, making it harder and more expensive to borrow money later. Emergency savings are harder to protect — cash kept at home can be lost, stolen, or damaged. Payday loans and title loans become more tempting when cash is tight, and these carry interest rates of 300% to 400% annually.
Employment can be harder too. Some employers require direct deposit. Landlords may demand a bank statement as proof of income. Utility companies may charge a deposit if there is no credit history.
Alternatives that provide some banking functions
Prepaid cards
Check-cashing accounts
Credit unions
Online banks
Frequently Asked Questions
Can someone get a job without a bank account?
Yes. Many employers accept paychecks by check or payroll card. Some still pay cash. However, certain employers and industries — particularly government jobs and large corporations — require direct deposit. If direct deposit is required, the person can open a prepaid card account or an online bank account to receive it.
What happens if someone needs to borrow money without a bank account?
Borrowing becomes more expensive. Banks and credit unions will not lend without an account. Payday lenders and title loan companies will, but charge 300% to 400% annual interest. Credit-builder loans through credit unions or online lenders are cheaper but still require some form of account or prepaid card to receive the funds.
Can someone open a bank account if they have been turned down before?
Yes, but it depends on why they were turned down. If the reason was unpaid overdrafts or fees, the person can wait — most banks stop reporting closed accounts after a few years. If the reason was a ChexSystems report (a banking history report), the person can request a copy and dispute errors. Some banks specialize in second-chance accounts for people with banking problems.
Is a prepaid card the same as a bank account?
No. A prepaid card is a spending tool, not a savings account. Money on the card is not insured the way bank deposits are. If the card is lost or stolen, recovery depends on the card company's policy. However, prepaid cards can receive direct deposit and allow bill pay, making them useful for people who cannot open a bank account.
How much does it cost to be unbanked per year?
Costs vary by how often the person moves money. Someone who cashes a paycheck twice a month, pays four bills with money orders, and sends one wire transfer monthly might spend $50 to $100 per month, or $600 to $1,200 per year. Someone who uses a prepaid card and fewer cash transactions might spend $100 to $200 per year.