Do You Need a Bank? Experts Weigh In

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For something as seemingly mundane as banking, Americans are surprisingly split about the need for it, according to a new survey.

Indeed, the new Best Banks 2023 GOBankingRates survey found that only 56% of Americans say they “definitely need” a bank.

That leaves a whopping 44% of the population being somewhat ambivalent about the need for a bank: 20% of Americans say they “probably need” one and another 20% feel neutral about it. Meanwhile, 1.9% say they “probably don’t need” one and 1.6% say they “definitely” don’t.

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Data shows, however, that despite this feeling, the majority of Americans have bank accounts. To put this in context, 4.5% of U.S. households — 5.9 million Americans — were considered “unbanked” in 2021, meaning that no one in the household had a checking or savings account at a bank or credit union, according to data from the Federal Deposit Insurance Corporation (FDIC).

A Better Way to Bank

Let’s first take a look at why some people aren’t using banks and then examine the impact of this.

Why Some Americans Are Unbanked

Reasons Americans cite are varied, with the top one being not having enough money to meet the minimum balance requirements, which was cited by 21.7% of the unbanked, according to the FDIC.

“Minimum balance requirements and an industry lacking technology, in terms of speed of payments and product innovation, are just a few of the reasons why low- to middle-income workers do not see a need for a bank account,” said Rob Nardelli, director of commercial banking at DailyPay. “They can go online and sign up with a neobank in minutes, without ever having to leave their homes.”

Another reason that might make Americans ambivalent about banks are fees. Indeed, the GOBankingRates survey shows that the feature that is most important to Americans when opening an account with a new institution is low fees — it’s the top reason with almost 40% of respondents selecting this.

Just last October, President Joe Biden, in conjunction with the Consumer Financial Protection Bureau (CFPB), announced a crackdown on so-called junk fees including banking overdraft fees and excessive credit card late fees, which end up costing American consumers a lot of money.

A Better Way to Bank

“Keeping money in banks is becoming expensive every day,” said Beth Rivera, founder and CEO of Best Financial Planners, citing the service charges that are added or increased annually, such as ATM fees, overdraft protection services, or account maintenance.

“These fees can add up over time and can be a significant expense for consumers, particularly those living on a tight budget. Consumers do not see the value in paying these fees, especially if they are using only a limited number of banking services. They might feel that the fees outweigh the benefits they receive from the bank account, such as being able to use online banking and being able to use a debit card to make transactions,” Rivera said.

According to the FDIC, the other top reasons cited for not having an account were the distrust in banks, with 13.2% and the lack of privacy, with 8.4%.

This distrust can take a variety of forms but often comes down to whether or not one feels confident in how institutions protect their customers’ money and personal data, explained Shyam Pradheep, general manager at financial literacy platform Zogo.

A Better Way to Bank

“With frequent headlines about privacy scandals, barely half of consumers trust their banks to securely manage their personal financial data. If someone is distrusting of the institution options they’re surrounded by, they will default to distrusting banks as a whole. Getting apprehensive Americans to trust banking providers is one step in the right direction to changing their mindset about banks,” Pradheep said.

Take Our Poll: How Big of a Sign-Up Bonus Would It Take for You To Change Banks?

Generational Differences and Societal Changes

Additional reasons include generational preferences and societal changes. For example, the age group saying they “definitely need” banking, is the 65-and-over age bracket, which takes the lion’s share, with 79%, according to the GOBankingRates survey. Conversely, only 43% of the 18-to-24 age group and almost 53% of the 25-to-34 age group feel the same.

“We’re seeing a seismic shift when it comes to traditional banking, especially from those who are Gen Z. In fact, more than half of Gen Z don’t have an account with a traditional bank or credit union,” said David Donovan, EVP of financial services at digital consultancy Publicis Sapient. “Their general distrust in the security of conventional banks, brokerages, and other financial services providers is driving them toward newer fintech tools and mobile apps that simplify financial services and gamify their financial experiences.”

Donovan added that younger people want greater personalization when interacting with them, and also want transparency not only to fees that are levied on them but also on their stance on sustainability.

“They seek financial providers that align with their values and views on society and the environment, and very few traditional banks currently meet that criteria,” Donovan added.

Finally, the pandemic has reshaped the economic landscape in the past few years and has dramatically changed the way we work — and in turn, for some, the way they need banks.

As such, the rise of a cashless economy in the U.S., combined with the proliferation of the gig economy, might be another reason for the ambivalence about banking.

“In the wake of COVID-19’s work disruptions, many people turned away from regular paid jobs, whether willingly or by chance, and started to earn money in untraditional ways, such as turning a hobby into a side hustle that may or may not include regular paydays and tax withholdings,” said Kate Hoots, banking analyst, MerchantMaverick.com. “Combine that with the usual non-bank money-handling options like payday lending, money orders, and reloadable prepaid cards, and you see that it’s entirely possible to live and work without using traditional banking services.

Are People Who Think They Don’t Need a Bank Correct and Is This Advisable?

By and large, in most cases, no, experts say.

First, despite some Americans’ reservations about banks, they are still necessary to accomplish many daily tasks.

“In order to get your paycheck you will most likely need direct deposit. Which will be connected to a bank account. Even if you get a paper check from your job you still need a place to cash it without paying fees to do so. To pay most household bills a bank account is required to be connected. This is common for many utility and power companies,” said Matthew Coan, owner of personal finance website Casavvy.com. Coan added that the 20% saying they “probably need a bank” don’t understand how difficult their life might be if they dropped the traditional banking system altogether.

He noted, however, that the good news is that banks that are not treating their customers well will most likely see them leave, “which will hopefully cause the big banks to rethink how they treat their customers along with making major changes to the unnecessary fees that they charge.”

There are other reasons why this would not be advisable, as beyond checking and savings, banks provide additional services, such as extending loans or providing investing options that help consumers manage their money in the most efficient way possible.

“By providing these services, banks empower consumers to have greater control over how their money is stored and utilized. Additionally, they also provide consumers with benefits for fraud protection, whereas other institutions may not be able to protect consumers against fraud and theft,” Zogo’s Pradheep said.

“Thoroughly researching banking options and evaluating the services they provide against your own needs is the best way to understand what option is right for you,” Pradheep added.

Finally, as MerchantMaverick.com’s Hoots explained, alternate services such as money orders and prepaid cards charge significant fees compared to banks or credit unions.

“And anyone who hopes to build a credit profile in order to someday take out a loan, to qualify for a credit card, or even to rent an apartment without a cosigner, should start a bank account as soon as possible,” Hoots added.

More From GOBankingRates

Methodology: GOBankingRates surveyed 1,000 Americans aged 18 and older from across the country on between December 7 and 12, 2022, asking nineteen different questions: (1) What category does your current financial institution fall under?; (2) Have you considered changing Banks within the past year?; (3) If you have considered changing banks in the past year, were any of the following factors? (select all that apply):; (4) Which feature, perk, or other offering is most important to you when opening an account with a new institution?; (5) Are you currently satisfied with all your banking products and services offered by your Bank/Credit Union?; (6) Would you ever have different types of accounts across multiple banks? (i.e. Checking at Chase, but Savings at TD Bank); (7) What is your most preferred method of banking?; (8) Which of the following is the biggest factor of you staying with your current bank?; (9) Which of the following bank accounts do you currently use/have open? (Select all that apply); (10) How much is the minimum balance you keep in your Checking Account?; (11) How much do you currently have in your Savings Account?; (12) What amount of a sign up bonus would make you consider switching banks?; (13) Have you considered using any app-only banking platforms (aka neobanks) in the past year (e.g. Current, Upgrade, Chime, Dave, etc.); (14) How important is it to you for your bank to be affiliated with a crypto exchange/platform?; (15) In the past year how often have you written a physical check?; (16) When was the last time you visited your bank in-person?; (17) Why would you choose to visit your bank in-person? (Select all that apply); (18) When you think about banking, do you think of it as something you need or don’t need?; and (19) What services/products do you expect from your Bank and/or Credit Union? (Select all that apply). GOBankingRates used PureSpectrum’s survey platform to conduct the poll.

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A Better Way to Bank

About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.
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