NEW YORK - The nickel-and-diming never stopped.
The fees were constant: $28 to cash a paycheck. $1.50 for a moneyorder. A dollar or more every time I swiped the prepaid cash card Ibought at the drug store.
In all, I racked up $93 in fees in a monthlong experiment ofliving without a bank and making a go of it on the economic fringe.That works out to $1,100 a year just to spend my own money.
It may be hard to fathom why anyone would live this way, but afederal study last year found that about one in four U.S. householdsskirts banks and relies on services such as check-cashing and paydayloans. Many of these households bring in less than $30,000 a year.
Some do it because they believe they don't have enough money toopen a bank account or were burned by fees in the past. But it's notalways a matter of choice: Many can't open an account because of ahistory of bad checks or damaged credit.
There are other reasons too. Language barriers intimidate somewould-be customers, or they simply feel banks aren't welcoming. Forothers, literally handling their own money offers a sense of controlat a time of financial anxiety.
Federal and local governments want to bring this group into thetraditional banking world. The fear is that the chronic use of high-fee services keeps the country's poorest from moving up.
Yet there are signs that the slow economic recovery is leadingmore people to rely on certain alternative services. And it's notjust the poor.
Americans are expected to load $37 billion this year on toprepaid cards, which function like bankless debit cards and areavailable at drug stores and discounters. That's twice as much aslast year and four times the amount in 2008.
The tradeoff is often a tangle of fees. Some cards charge adollar a minute to call customer service and $5 just to add money tothe card. The still nascent prepaid card industry will come undernew federal oversight as part of this year's financial overhaul.
To find out what it's like to survive on these services I decidedto put away my credit and debit cards for one month. I suspended mydirect deposit in favor of paper paychecks.
In that time, I got by using only cash and services such as moneyorders.
It turns out fees were only part of the problem.
The costs
I don't recall the last time I had to cash a check, so I had noidea how expensive it could be. I forked over $56 to cash twopaychecks at grimy check-cashing stores. This accounted for morethan half my total fees.
And I was lucky. The check-cashing fee in New York is capped at1.83 percent. In Florida and Maine, where the cap is 5 percent,check cashing could have cost almost three times as much. About halfof states set no limits.
Most of my remaining costs, about $34, went to fees on prepaidcards.
These charges were the most frustrating because they were sounpredictable. The two cards I used each cost $4.95 - on top of themoney I was putting on the card - but came with wildly differentterms. Some cards cost as much as $29.95 upfront.
The first card I bought, a NexisCard, was the only option at thecheck-cashing place I pass everyday in my neighborhood onManhattan's West Side. I had to pay a $1 fee for each purchase. If Iused the PIN code to authorize a purchase, it was $1.50. And if Iwanted cash back at the register, it was $1.95. The card could alsobe used at bank ATMs for a fee. That's on top of the fee the bankcharges for out-of-network cards. I did this just once for a totalcost of $5.
The second card I bought was issued by Green Dot Corp., one ofthe bigger players in the prepaid market. This one had better termsbut still charged $4.95 each time I wanted to reload it.
Paying rent was also a process. I couldn't mail a wad of cash tomy landlord, so I went to a nearby Western Union to buy money orderswith cash from one of my paychecks. Each money order is limited to$1,000, so I needed two for my $1,300 rent.
This cost a total of $3.50.
The hassles
When you don't have a bank, you spend a lot more time managingyour money.
So many of my finances are automated - direct deposit, automaticbill pay - that it was jarring to spend so much time waiting inSoviet-style lines to cash checks and pay rent.
At the check-cashing place, I squirmed when the clerk counted outmy money by snapping each $100 bill high in the air. In my mind, theline of customers behind me was counting along in unison.
I also felt self-conscious when using my temporary prepaid card,which looked cheap, even fake. It didn't have my name on it and theaccount number wasn't raised as on most credit cards. A permanentcard wouldn't arrive for six weeks.
If a cashier's eyes lingered too long, I wanted to pull out myBank of America rewards credit card, which has "Platinum" in italicsacross the top.
Then there was the time a hotel charged my NexisCard $400 in caseI incurred any incidentals. I was told the charge would be refundedat checkout. But it took multiple calls over three weeks to get mymoney back. NexisCard refused to lift the hold until the hotel faxedthem an official release form.
The appearance of mystery transactions made me paranoid too. WhenI was checking the NexisCard account online, I spotted a $3 entryfor a "retail reload." This confused me because I never reloaded thecard. I filed a dispute and was told I'd get a call back withinthree days. The call never came.
A few days later, another $3 entry appeared. The customer servicerepresentative was as stumped as I was.
It turns out both "retail reloads" were credits for my priorcomplaints about incorrect fee charges. I learned this only aftertalking with the CEO of the company, Andrew Siden, weeks later aspart of the reporting process.
We determined that one credit was an error that worked in myfavor.
He agreed that the transactions can be confusing and thatmistakes happen. Siden noted that the company operates on thinmargins and does its best to fix mistakes when they're pointed out.
But I only caught the mistakes on my account because it was partof my job. Would I keep chasing down a few dollars here and therefor much longer?
I'm glad I don't have to find out.
THE ASSOCIATED PRESS
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