Growing up in the middle class, my most prominent experience with financial institutions was going through the drive through at the local bank with my mom.
As a piano teacher, my mom received much of her income via personal checks that she would then deposit into her checking account. I especially loved going through the outer lanes at the bank drive through because I was fascinated with the process of retrieving and sending the plastic tube-shaped capsule.
She would put her checks in the capsule and press the button to launch it over to the teller. I watched as the teller would receive it, then smile over in my mom’s direction. She would say a few friendly things into the microphone, which we would hear through the small speaker near our car.
When the transaction was complete, she would send the capsule back through that amazing system. I can still hear the sound the capsule made as it was sucked up and then arrived in the tube.
My mom would swing the lid open to get her receipt and maybe some cash. If we were lucky, the teller would send along several Dum-Dum suckers for my siblings and me. It paid to go to the bank with mom.
Between direct deposit and scanning checks from my smart phone, I’m sad to say that my kids haven’t ever experienced that. I’m sure they would not only be fascinated by the vacuum capsule system, but they would have lots of curious questions about banking and finances too.
My first checking account
As a child I never had my own bank account. I signed my babysitting checks over to my parents and they’d give me the cash.
After driving me 2,000 miles away from home to go to college, my dad helped me get my first apartment set up. Then, we went to the local bank to set up my first checking account. I was feeling pretty grown up.
Learning to hate payday loans
I was in college when I first heard about payday loans. Sure I had seen those places popping up on street corners all over with their big neon signs, but I had never been in one or known anyone who used one.
I thought I understood the concept just from the name. They would give a loan to people who couldn’t wait until their paycheck to get money.
At college I met a girl who had taken out a payday loan to cover one month’s higher-than-usual cell phone bill. She rolled that first loan into another and another, and eventually owed thousands of dollars, and even lost her car, in repaying it.
I don’t recall the amount of interest or the terms of her loan, but I do remember how I felt when I heard about it. I was completely and absolutely disgusted. From then on, I saw payday loan places as filthy, predatory businesses that made my skin crawl.
I never imagined myself actually walking into one.
A taste of the payday loan culture
Fast forward more than a decade. As a winner of the #FinHealthMatters essay contest, I was invited to participate in a simulation called FinX put on by the Center for Financial Services Innovation (CFSI).
To say it was eye-opening would be an understatement.
In teams of three (I got to be with Aja and Jessica), we were dropped off in various inner-city San Diego neighborhoods to complete assignments that simulated typical financial tasks of people who are un-banked or under-banked.
Off to experience FinX! #myfinx pic.twitter.com/vU9wBTT58o
— Jessica Garbarino (@JessGarbarino) September 21, 2016
My team’s scenario was that we were on a lunch break on payday and needed to cash some checks, pay some bills, and take care of other financial tasks before returning to work. We started with an $85 payroll check and a $15 personal check. Our team’s payroll check was written out to me, which seemed advantageous since I conveniently have a California license.
We couldn’t find a bank in our area, but there were payday loan stores in every direction. We knew the check-cashing fees would be steep at a payday loan place, but we didn’t have many options since our time was very limited.
As I waited in line with my ID in hand ready to cash my check, I was overwhelmed with all the signage full of numbers, disclosures, disclaimers, rules and fees. I had no idea how much this was actually going to cost me.
I thought I would have no problem cashing my payroll check with my in-state license. However, the worker said she didn’t recognize the employer so she wouldn’t cash the check.
Just like that we were out of luck.
Several doors down, there was a convenience store that had a sign on the window advertising “Check cashing here.” When we went in to inquire, the clerk told us, “Yeah, I know the sign says we cash checks, but we actually aren’t approved to do that yet.”
Just a case of false advertising.
#myfinx running all around trying to get $$$$….why is it so hard? pic.twitter.com/7RaLRjj9WK
— Increase Laws (@increaselaws) September 21, 2016
The third time’s the charm, right? We came to another payday loan/check-cashing center. I pulled the door to go in, but it was locked.
“That’s odd,” I thought. “It’s definitely normal business hours.”
Then one of my teammates noticed that the worker inside was signaling for me to take off my glasses. How odd! I wasn’t wearing sunglasses, just my regular glasses!
Apparently the store had a no glasses policy. After I took off my glasses I must have looked safe enough, because she unlocked the door and allowed me in. When I tried to cash the check, though, she said she could give me a Visa gift card, but she couldn’t give me cash. I didn’t even stay long enough to find out what the fee would be. We needed cash not a gift card.
Needless to say, none of the places offered us Dum-Dum suckers either.
The bank wins
Finally we found a bank. Never before had I noticed or appreciated the atmosphere and feel of a bank like I did then. I felt safe and comfortable when I walked in. I wasn’t bombarded with signs and disclaimers I didn’t understand. The workers smiled and were friendly. They educated me on my options. I wan’t interrogated or treated like a criminal.
#myfinx trying to figure out how to cash checks. It’s so hard! pic.twitter.com/QKyMgpSmpW
— Increase Laws (@increaselaws) September 21, 2016
Still, to cash a check, no matter the amount, at a bank cost me $8 because I didn’t have an account with them!
The teller was helpful though. Knowing that $8 was a high fee for my $85 check, she explained how I could open a free checking account. She even said that if I opened one in the next week they would reimburse the fee.
Who knew that cashing a check could be so complicated?
I was frustrated that everything took so long and had so many fees attached.
I was disappointed and turned off by the lack of customer service, confusion over policies, and the inconsistency in answers.
I was angry that real people with so little were being taken advantage of in such a big way.
I was sad to think of people doing finances like this because they don’t know any other way.
I was grateful for the opportunity to see from a different perspective.
I am thankful for my own financial health.
That was the point
In my case, feeling frustrated, overwhelmed, and angry was the point. The whole FinX experience was to help participants (in this case bloggers and financial service providers) to gain a deeper understanding of the complexity of consumers’ financial lives.
Knowing that I have readers who have used, or even rely on, these alternative financial products and services makes me even more motivated to spread the message of financial health. I’m even more convinced of the value of financial education, something that’s not even taught in schools!
Our experience wouldn’t have been complete with a good debrief and discussion on what can be done to improve financial health, the whole mission of CFSI. The answers aren’t simple or clear.
While changes in policy, education, and financial products and services themselves are all part of the needed solution, I feel my role is a little smaller and more personal, like the man who stood on a beach full of washed-up starfish, throwing back one starfish at a time.
My goal is to help on an individual level, making a difference by helping one person at a time improve their financial health by getting out of debt and making smarter financial goals.
I’m curious…
- Have you ever used any alternative financial products or services like payday loans, check-cashing, pre-paid reloadable cards, pawn shops, money gram, etc?
- What do you think is the answer to increasing overall financial health in our communities?
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Great article! I don’t know if there’s any one answer to increasing overall financial health. I think part of the process is just talking about finances and money. It may be sharing personal stories, like yours, or even sharing helpful articles and resources on how to improve personal finance. For some people, I think a short-term personal loan might help while they try to get their finances back up, but that really just depends person to person and company to company. I’m glad you shared your experience though.
Hi, Stephanie. It’s a wonderful article about your payday loan experience. When we get paid, then we firstly priority should be to pay back the loan time to time. Thank you for your post. I work for a Austin payday loan firm and i have a lots of experience to see the people all time who have taken payday loans. Many company took high interest and that’s why lot of people unable to pay the loan back in right time.
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When I worked as a bank teller one Summer in college I found that we would cash for people who had an account and if the check was drawn on our bank. One day a long line of paychecks came in, if they didn’t have an account, they had to show two forms of ID. I don’t remember if we could cash a non-bank check for a non-customer, I know I don’t remember an $8 fee. But I do remember that certain accounts would get a fee for using a teller.
Thank you for your post. I work for a regional bank and I see people all time who have taken out payday loans and the interest is so high they can’t pay the loan back. Each time the don’t pay the loan more interest and fees are added. We had a client recently who wrote a check to pay his payday loan and he didn’t have sufficient funds in his account to cover the loan so my bank returned the check. He now has a return check fee plus the added fees and interes by the payday loan company. He is now in a horrible mess that is not easy to clean up. So sad.
I don’t quite understand banking in America/Canada. Do people really not have bank accounts & why do you guys still use cheques, have fees and limited tranfers?
Over here (UK) everyone has a bank account, even those on benefits. We stopped using cheques as the main means of payment years ago and bills are paid via stand order, direct debit, bank transfer or in cash in a bank. Shops no longer except cheques.
If we do have a cheque we can cash it at a cash converter shop or pay it into our own bank we can’t just go into any bank as we need to have the fund to get the cash.
I rarely go into my bank nowadays, I would love a drive through bank though.
I’ve had payday loans in the past and still have defaults on my credit report to prove it.
I wish we had the American way of buying a house though, I’ll never afford one over here.
I’ve never had a payday loan before, but I do have some experience with prepaid debit cards. They’re easy to use with little problems. However, we have run into trouble with them at restaurants. Apparently holds are placed on the card to accommodate estimated tips (whether you want them or not), so you have to be careful with them if you’re near the end of your balance.
That’s funny that you mention having a yucky feeling about payday loan places. I have always felt the same way too, but I considered it to be partly because they are usually located in a less-favorable part of town. It really is too bad that many people end up relying on services like this. Knowledge truly is power, and I very much appreciate how much knowledge you share with all your readers.
Longform.org has linked to several articles over the years about pay day lending and pay day loans. If you go to the website and then use their search function you can find some excellent writing on the topic. There are common-sense solutions but unfortunately in what is undoubtedly a greatly fractured and contentious political arena none are likely to become law.
That’s frustrating that politicians can’t agree that predatory lending is morally wrong. Well, I guess politics isn’t really know for handling moral issues well. 🙁 Thanks for the tip on further reading.
A fascinating and disturbing story. What jumps out at me is how our country is dividing into “haves” and “have nots”.
I also thought about the possibility of cashing a check at a grocery store but then I remembered that so many poor, urban neighborhoods do not have grocery stores.
I’m also thinking about how important it is to save some money out of each and every paycheck….even if it is only $1.00.
Yes– the “grocery” stores in the ghetto are liquor stores that happen to have milk and bread too. 🙁 Saving from every paycheck is such a simple but powerful habit! We need to start kids young!
Wow, how frustrating!! I have never, thankfully, needed to use check cashing, payday loans or any other such thing. I think it is not taught in our culture, which is why I talk with my kids about it constantly. So sad that people are preyed upon so much in this country! I remember going to college and getting at least 1, if not 3-4, credit card offers in the mail every week!! Thank God I never opened one, but plenty of friends did and left college in such debt!
Oh yes! At least with the credit card offers in college you got a t-shirt or a frisbee! (I kid.) It’s sad that we have to feel so afraid of financial services in general because there are so many that are scammy or downright predatory!
Unlike a previous poster I’m a huge fan of regulation. Indeed banking regulation is one of the primary factors touted as the reason Australian banks, and the Australian economy, survived the GFC almost unscathed. (We’re in about our 24th or 25th year without a recession, which is a global record.) However regulating payday lenders in the US has only been moderately successful because of the way the legislation is written, and because large payday lenders are also large political donors.
In Australia, every child is taught basic financial literacy in school. A national bank has a very effective school outreach program which teaches financial concepts starting in primary school. The same bank also has a school banking program, which encourages children to set up bank accounts and make routine deposits. (These are collected at school once a week, with children receiving small prizes for every 10 deposits.) This program has been widely uses for a couple of generations now, so most Australians are at least familiar with banks. Of course it also helps that the government only uses banks – no mailing of checks here. Poorer people are more likely to be on some form of income support, so most will have a bank account. (All banks have a no-fee option for people who are poor.) If you aren’t on income support you still need a bank account for tax returns and Medicare rebates. I would say that the overall percentage of Australians without access to a bank account would be very small.
Go Australia! It sounds like you have some great things going on down under! If you had to have a bank account to get a tax refund or government aid, that definitely encourage people to get banked here. That’s great that the kids are learning personal finance in schools. The first time I ever heard of a debit card was in my senior year of high school, and even then, I just thought they were mispronouncing debt. My parents just called it all “plastic” so I didn’t know the difference!
I always had a savings account, and deposited my paychecks in it until I turned 18 and opened my first checking account. My father was raised very poor and has always had poor money management skills, so he always cashes his paycheck at the grocery store for a small fee (maybe a couple bucks?).
I used to be a community mental health outreach worker,and teaching financial literacy was a community skill that I worked on with my clients. Most used a check-cashing place, if they did not have a protective payee. A few cashed checks at the grocery store, and a few managed their own checking and savings accounts. Actual literacy skills were often a first step towards financial literacy. Maybe a quarter of my clients were functionally illiterate, could only sign their name, or had first grade reading skills. I had one client who could not read AM from PM on his pill minders and would take the wrong medicine until I color-coded them.
I had one client who had a part-time grocery store job with a job coach and a stable place in a group home that I oversaw. She was given a few hundred dollars credit from the Blair Catalog. She quickly maxed it out and took a payday loan to try and help keep up on the bill. The payday loan snowballed and she stopped paying her rent because eventually she owed more than she brought in at her job. I tried to help her by encouraging her to cut up the credit card, focus on paying rent first, and letting the rest fall where it may, but she refused and was eventually evicted. I thought it was insane that they would keep taking more and more money at 25%+ interest from a lady with serious mental health issues, who could not even remotely understand the math of interest,and who made less than $200/week.
Oh Jen! That is such a heart-breaking story (well, actually all of them)! Taking advantage of those with mental health issues like that is unacceptable!
It sounds like you were able to do so much good in a very important (but under-appreciated) job. 🙂
15 years ago I worked in the corporate office of a large national company. I became good friends with the receptionist, who happened to be about 10 years older than me. I was shocked when we went to a payday loan shop one Friday afternoon during our lunch break so she could cash her check. I didn’t know anyone actually used those places! I remember asking her why she didn’t use a bank and/or the direct deposit that the company offered and keep the whole check amount instead of paying some liquor store $50?!! I can’t remember her answer now but I know it was not an answer that made any sense. She lived in a cycle of cashing her check, spending all the money within the first few days, and then scrimping until the next check two weeks later.
She was raised in a community where banks are an unknown. I think it’s the same thing with me and new concept restaurants. When Nothing but Noodles first opened, I really wanted to try it out but I didn’t want to go by myself for fear of embarrassment. I thought, “How does it work? Will I know how to order? How much does it cost? If it’s too expensive, I won’t want to turn around and walk out because people will think I’m too poor. ” I’m sure those were the same irrational fears my friend had about banks. She was comfortable with cash in hand because she knew how it worked. When I think about banks from a certain perspective, they are kinda scary, impersonal, and conceptual. Where IS my money?
Is there a middle ground? A place that is comfortable and known? It just might be that bank in the Walmart kiosk.
YES! I love your restaurant analogy Susan! This was what I came away with too. As I was standing in the bank, finally feeling comfortable after the creepy feel of the payday loan places, I got to thinking that I felt comfortable because this was my “normal.” For people who have grown up using alternative financial services, that is their normal and the would feel UNcomfortable in a bank.
Have you listened to the Freakonomics Podcast titled “Are Payday Loans Really as Evil as People Say?” I learned a lot about Payday loans and the people who need them and found it fascinating (I am a nerd!).
When I was in high school, I would get my paychecks cashed at the grocery store for a fee. I didn’t mind because it was the way I could independently get my money- I would have had to go through my parents at the bank. Cost is relative to the need and person.
It is hard to say what the answer to these issues are as I have a business degree and interest- but I am usually more in favor of less regulations and more business-people problem solving- such as with the check cashing fee if I do not have a bank account and want the cash. We both had wants/need and they were both met, and I was always satisfied. I now have different needs and circumstances, so the fee seems like a waste.
I’ll have to look that one up. I did read the book Freakanomics years ago. 🙂
I think choices are great. I think some of the problems with people relying on alternative financial products is that they are missing out on the choice. Either they aren’t educated on the options, or the options physically aren’t accessible. In our FinX orientation, they showed a slide of Sand Diego with the different areas shaded by income level, then marked all of the FDIC banks in one color and the payday loan/check cashing places in another color. The banks are hard to find in the poor areas, but the alternatives are all over the place.
I have always noticed that pawn shops and payday loan places are all over in the poor areas, but I hadn’t ever noticed that banks aren’t nearly as accessible as they are in wealthier areas.
The only times I’ve used an “alternative” to cash a check is when I’ve cashed a check at a grocery store. They charged a $2 or $3 fee unless you purchased something. I’ve never gone into a payday loan company and now I work at a bank.
If you’re not going to a bank where you have an account (or where the check originated) then a grocery store is probably your best bet. Mainstream grocery stores (ones that aren’t primarily liquor stores or discount stores), like banks, are hard to find in the poorer areas though.
I, too, well remember a lollipop and fun tube-sucking capsule. I do finances for our church, so my girls now get to experience this every week now. 😊 The pay-day loans culture is a scary one to me. And incredibly difficult to pull out of when things spiral so quickly out of control. My heart goes out to people who feel stuck in this cycle, feeling like there is no way out. We have been following your blog, religiously reading every post for about a year now. Like you, we had college loans that we have tried to pay off. Not quite 100K, but close to it! We are hoping we will make that last payment next month, beating our debt-free goal by 6 months. My prayer is that everyone can be experience the financial freedom we are finally beginning to walk in!!
Yes, it is so sad to see people who are stuck in this cycle. It is scary!
That is so exciting for your family Krystal! That is AWESOME that you’ll be beating your goal! Thanks for sharing!