Options for the Unbanked

Here's how consumers without a bank account can rejoin the ranks of the banked.

A bank customer making a transaction with a bank teller in a retail bank.

Millions of Americans have no bank affiliation, but a significant number would like to establish one.

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Almost 10 million U.S. households don't have a bank account. That's one of out of 12 homes in the nation, according to a 2011 survey by the Federal Deposit Insurance Corporation.

Many people don't want a bank account. According to research conducted over the past few years by the Federal Reserve and released in its 2014 Consumers and Mobile Financial Services report, 24 percent of unbanked consumers say they don't have a bank account because they don't need or want one. Six percent reported they simply don't like dealing with banks.

But many of those 10 million households can't get a bank account – and presumably would like to. At least 10 percent of the 2,657 respondents surveyed by the Federal Reserve reported bank history problems as the reason they didn't have a bank account. And 15 percent simply refused to answer.

[Read: Finding the Best Bank for Your Needs.]

Why unbanked consumers often can't get a bank account. "I can think of two reasons," says Alex Matjanec, co-founder of MyBankTracker.com, which offers banking reviews and information. "One, banking infrastructure has become too expensive for some people who live paycheck to paycheck, and they can't meet the minimum to meet the fees. The second reason is that some people get enough dings that ChexSystems picks up, and so they're being denied accounts."

ChexSystems is a Woodbury, Minn., company that's been around since 1971 and is a major player in the financial services industry. When you apply for an account at a bank or credit union, most managers pull up your ChexSystems report. If it looks ugly – think scores of overdraft fees or worse, a previous bank account was terminated and you owe money – the new bank you’re hoping to join may deny you an account. That's how plenty of consumers wind up without a bank account and instead cash checks at convenience stores or payday lenders and solely spend with cash or prepaid cards.

In addition, 51 million people are underbanked, according to the FDIC. They have a bank account but supplement their finances by using services such as payday lenders, pawn shops and rent-to-own stores.

There's a reasonably convincing argument that the world of alternative financial services isn't entirely terrible, or as devastating as it used to be. In recent years, some stores have been charging relatively low fees for cashing checks. Walmart, for instance, charges $3 for checks of $1,000 or less. Meanwhile, fees for some prepaid cards have come down while banking fees have gone up.

Last fall, a Bankrate.com survey found that fees at financial institutions had climbed for the 15th year in a row. The average fee to maintain a checking account is $5.54 a month. Theoretically, a consumer might find that fees for prepaid cards and check-cashing services are similar to the fees to maintain a bank account.

But make some missteps, and it will cost you. Some prepaid cards come with inactivity fees, fees for checking your balance at an ATM and even fees for making purchases at stores. Consumers can easily lose plenty of money – just as they could with a bank if they rack up nonsufficient fund charges and overdraft fees. And plenty of check-cashing services charge up to 3 percent of a paycheck, which might not sound like much until you realize you're forking over $24 to get an $800 check.

[Read: Do's and Don'ts for Building a Solid Credit History.]

So what if you are unbanked and don't want to be?

"Folks on the ChexSystems have slim pickings," says Jose Quinonez, CEO of Mission Asset Fund, a San Francisco nonprofit that helps financially excluded families, especially low-income and immigrant families, participate in the American economy by, for instance, helping them access loans to start a business.

But it isn't hopeless. "Some banks will take on these folks," Quinonez says. He adds that your odds are much better if you don’t return to the bank (or banks) where your troubles began and if your transgressions aren't too serious. If there wasn't, say, fraud involved.

Matjanec agrees, adding that many large banks offer “second chance checking” programs, such as Wells Fargo, PNC Bank and BBVA Compass. "It's the middle ground between a prepaid card and having a checking account,” he says. “There are tighter limits on check writing and debit purchases. They're very structured programs, and you have to prove yourself. It's really like a secured credit card, where after a year, if you're a proper customer, then they'll transition you into a traditional checking account."

Secured credit cards, for those who don't know, are credit cards for consumers with troubled credit histories and low credit scores. You put your own money on the card and use it like a traditional credit card, and then if things go well after a year, you're given an unsecured credit card.

But ironically, many banks are instead sending unbanked consumers to their own prepaid cards. "Chase Bank, for example, got rid of their second chance program and now offers Chase Liquid, a prepaid card. It has one $4.99 monthly fee, and that's a viable alternative for some consumers," Matjanec says.

[See: 10 Ways Companies Annoy Customers.]

But if you really want a traditional banking account, and you aren't interested in prepaid cards, you can probably find one. Some banks, especially newer online banks, aren't as selective, Matjanec says, because they are focusing on building up their deposits. That doesn't mean they won't see your ChexSystems report, he adds. It's just that some banks won’t care about your past.

And oddly enough, many bank customers are beginning to resemble unbanked customers. "The lines are blurring," Matjanec says. "If you have an American Express Bluebird prepaid card, you do have a free checking account with them, but they aren't considered a bank. And they don't have branches. But if you have a checking account with the online bank Ally, they don't have branches, and so you can't go into a bank with them either. As bank branching starts to decrease, the need for a traditional checking account decreases."

But it's still easier to have a bank in your corner. As a Tufts University report released last year, "The Cost of Cash in the United States," found, the unbanked and underbanked spend more money in fees – and in time to access their own money – than the banked do. As any unbanked or underbanked consumer knows, to survive being poor, it would help to be rich.