The number of Illinois households that don’t use banks is on the rise. The number is 1.2 million now, up by 172,000 in recent years, according to a survey by the Federal Deposit Insurance Corp. Why don’t they?
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“Typically they don’t have enough money to get the checking account or the banking services free. And with the banks raising fees for things like just routine, regular checking accounts, for some people they feel it’s cheaper if they go with a prepaid card that has a smaller monthly fee,” said Spencer Cowan, vice president for applied research at the Woodstock Institute, which advocates for financial justice for low-income people.
Those who are “un-banked” are often what you’d call “working poor” – employed but with just enough income to squeeze by, Cowan said. He says using a prepaid card to incur lower fees is a rational decision, but these folks miss out on an opportunity to build a credit history, which is sometimes necessary to get hired for a job or to rent an apartment.