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Don’t Get Played
A guide to drama-free banking
Chantal Hylton

My printer had run out of ink and the replacement cartridges could only be bought online. Simple enough. But unfortunately my grandmother didn’t want her credit card information “all over the Internet.” Her solution was for me to buy a whole new printer. As I stood outside Staples with my new industrial-looking printer, I made up my mind. I needed my own bank account so this kind of ridiculousness wouldn’t happen again.

Soon after, I visited a Chase Bank branch and learned about a student checking account that I qualified for. I decided to open one. All I needed was my Social Security card, one other form of identification, and $20 to start the account. They told me I didn’t need my parents permission if I was 17 or older. Even better, there was no minimum balance. A balance is the amount of money in your bank account. The minimum balance is a set dollar amount that the bank says you must have in that account at all times or you may have to pay a fee.

Having a bank account makes me feel secure about stepping into adulthood. If used correctly, a bank account can actually save you a lot of unnecessary costs.

Unfortunately, more than 825,000 New York City adults don’t have accounts. Maybe keeping cash at home seems more convenient, or people are afraid of bank accounts because they seem complicated with a lot of strings attached. But the reality is, having a bank account can be an easy and important way to take responsibility for your financial future.

Avoiding Scary Fees

At a recent forum called “Banking Under the Mattress: Financial Literacy and Unbanked New Yorkers,” sponsored by the Center for New York City Affairs, public officials and financial literacy advocates explained that there are high costs associated with not having a bank account. For example, if you have a check to cash, you pay a check-cashing fee. If you have a bill to pay, you pay a fee to get a money order. And for adults without bank accounts, it’s difficult to get a low-interest loan if they need it. That means “unbanked” people face big obstacles when they try to buy a home or start a business.

With a bank account, cashing checks and writing checks is free, and you’re much more likely to get a loan if you need one. But according to Jonathan Mintz, the commissioner for the city’s Department of Consumer Affairs, people get scared off because banks often have unpredictable fees, like overdraft fees. Don’t know what overdraft means? The panelists explained it this way:

You “overdraw” your account when you pay for something with a check or debit card but don’t actually have enough money in your account to cover it. Say you pay for a $5 mocha-latte with your debit card, but you only have $4 in your account. Instead of saying “funds not available,” the bank will cover you for that extra dollar, but then typically charge you a $35 fee for the transaction. Your $5 coffee purchase could end up costing you $40. Do that more than once, and you might be scared out of ever having a bank account.

Safe and Simple

But it doesn’t have to be that way. To encourage New Yorkers to get bank accounts, the city helped create the NYC SafeStart Account. It eliminates all of those fees that you worry about with a typical bank account: there are no overdraft fees and low monthly fees, if any.

Unfortunately, these features are only guaranteed for the first two years you have the account, and SafeStart accounts are only available at a handful of small banks that aren’t in every neighborhood. There are other options, though.

Every bank in New York is required by law to offer a simple, low-fee account. In these accounts, you’re required to make a starting deposit of at least $25, and after that you’re only required to keep a minimum balance of a penny at most. However, there may be a monthly fee of about $3, or a little more if you make more than eight withdrawals each month. (A withdrawal means taking money out of your account, either by writing a check, getting cash at an ATM, or using a debit card to purchase something.)

Choose Wisely

If you do decide to get an account, whether it’s a SafeStart account or something else, it’s smart to shop around. Many banks don’t advertise their most basic bank accounts, so ask what their most basic free or low-cost checking account is. Find out if there’s a monthly fee and how many transactions are allowed per month, then decide if these rules fit your own monthly banking needs.

This might all seem far-off for many teens, but if your age is in the double-digits, you’re pretty close to being on your own. Soon enough, you will have a job and need to learn how to manage your money—n ifs, ands, or buts. Believe me, just saving your cash under the mattress or in a dresser drawer isn’t wise. Just ask my aunt, who saved hundreds of dollars in a drawer full of scarves. When her daughter helped her remodel the house, lots of stuff got thrown out, including her cash!

To find out how to open a SafeStart account call 311 or google “NYC SafeStart.”

The Cost of Being Unbanked

Managing your money without a bank account can be pricey. Here are some common ways unbanked people end up paying more:

Pre-paid debit cards: Pre-paid debit cards are becoming more popular with some employers as an alternative to a paycheck, but there are lots of hidden costs. Take, for example, the Rush Card. You’re charged a fee for activating the card (up to $20), a monthly fee (up to $10), ATM fees, a fee to check your balance, a bill payment fee, plus mysterious “convenience” and “maintenance” fees. By the time you’re done paying fees, you won’t have much left on your card.

Money orders: Without a checking account, you have to use money orders to pay bills. They cost only $1.10-$1.50 at the post office (of course, you’ll probably have to wait in a long line). But at banks, you’ll pay much more: Money orders were $7 at one bank near the NYC office. At that rate, you’d waste $84 annually just by paying rent with money orders.

Check cashing fees: When you get a paycheck, check cashing services take a cut of your hard-earned income. It’s not much—only a buck or two for a $100 check—but if you have a bank account, your bank will cash those checks for free.

And the Cost of Banking Badly

A bank account is only a good thing if you know how to use it. Bank fees are generally low, but they can also be sneaky. Here’s what to watch for:

Overdraft fees: Like we said before, these are a stinker. They’re expensive—usually between $8 and $38 per transaction—and they sneak up on you. Fortunately, a new law requires banks to ask you if you want this “overdraft protection”—they’ll try to make it sound like a good idea, but just say no. You might get embarrassed if you try to spend more than you have, but at least you won’t be in debt.

ATM fees: These can add up quickly if you use any old cash machine. Plan ahead: Use your own bank’s ATM for free and skip the fees.

Credit card finance charges: At some point, credit card companies will start courting you. Credit cards seem great when you spend $500 and only have to hand over the minimum payment of $15 or so at first. But every month that you don’t pay off your bill in full, you’re racking up serious “finance charges,” which is just another term for interest. If you pay late, you can get hit with big penalties, too. And be alert, or the credit card company may switch your due date to another day of the month when you’re not looking.

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