Wal-Mart checking accounts part of a growing low-cost banking trend
Wal-Mart Stores, the nation鈥檚 retailer, is jumping into banking with the help of Green Dot, which also provides prepaid debit cards to the chain.
With GoBank, Green Dot provides a low-fee聽聽that comes with a debit MasterCard as well as online and mobile options. The overdraft-free accounts will be available at stores nationwide by the end of October. While a fee of about $3 is required initially, a monthly charge of almost $9 can be avoided by having at least $500 in direct deposits made during the period, Green Dot鈥檚 website says.
Wal-Mart鈥檚 long-expected move comes as some of the biggest U.S. banks have offered low-cost options to attract consumers who don鈥檛 have bank accounts, a surprisingly large group. Government estimates suggest as many as 17 million American adults fit this description, handling most of their financial transactions with prepaid debit cards and using pricey alternatives such as payday lenders and pawnshops when funds run short.
Surveys suggest some consumers avoid setting up a checking account out of fear they may run up overdrafts or bounce a check, incurring fees that often reach $35 or more for each instance. Overdraft fees alone topped $30 billion last year, according to industry estimates, while so-called underbanked Americans paid out thousands in charges and interest, on average.
鈥淲al-Mart customers want easier ways to manage their everyday finances and increasingly feel they just aren鈥檛 getting value from traditional banking because of high fees,鈥� Daniel Eckert, Wal-Mart鈥檚 senior vice president of services, says in a company聽. With GoBank, he says, 鈥渙ur customers will have exclusive access to one of the most affordable, inclusive and easy-to-use checking accounts in the industry.鈥�
GoBank specifics
To get started, you have to buy a kit for $2.95. That lets you set up an account online using a computer or mobile device. Included is a temporary debit card to use until your identity is verified, when you鈥檒l get permanent plastic in the regular mail. An initial deposit has to be at least $20 and can鈥檛 top $500. After that, there鈥檚 no minimum balance required, but you can鈥檛 put in more than $2,500 cash in a single day, or more than $3,000 in any 30-day period. You don鈥檛 need a minimum credit score to open an account.
Green Dot is offering an additional benefit in the form of an early payday. If it receives notice that a payroll direct deposit is coming, the funds will be made available even before the money arrives. Deposits can also be made using mobile device cameras. Using an out-of-network automated teller machine costs $2.50 per transaction, plus whatever fee the ATM operator charges. But the bank鈥檚 network has 42,000 machines.
Sending money will be easy too. You will be able to pay bills and send money to friends using email and text messages from a GoBank account, at no extra charge. But there are no paper checks provided with this checking account.
Finally, perhaps in a hand-holding attempt to guide you if you鈥檙e new to banking, GoBank鈥檚 鈥淔ortune Teller鈥� will analyze a potential purchase, comparing the cost with your available balance and expected direct deposits. The tool will determine if the purchase is within your budget or if you should put it back.
Growing trend
Big banks that have recently introduced low- or no-fee deposit accounts include Citigroup, Capital One Bank and KeyBank. Some aim specifically at the 8.2% of U.S. households classified as unbanked in a聽聽from the Federal Deposit Insurance Corp. That鈥檚 10 million households, or 17 million adults who rely on payday lenders, check-cashing stores and prepaid debit cards to pay bills and handle finances. Earlier this week, Citi聽聽about 21% of U.S. consumers making $30,000 or less each year don鈥檛 have a checking account, largely because of fees and minimum balance requirements.
Unbanked households can run into obstacles when trying to establish credit, save for retirement or buy a home. For banks, they represent an untapped market.
鈥淕oBank is breaking down the barriers to traditional banking聽and brings the benefits of a FDIC-insured checking account that鈥檚 loaded with features to a large segment of Americans,鈥� Steve Streit, Green Dot鈥檚 chief executive, says in a prepared statement.
Even politicians in Washington have recognized the issues involved. Some, including Sen. Elizabeth Warren, a Massachusetts Democrat, suggest the floundering U.S. Postal Service should revive its one-time banking role to offer such services at low costs. The average underserved household spends an average $2,412 on fees and interest for non-bank financial services, according to a Postal Service聽
That鈥檚 a lot for those living on low incomes, and any help they can get to save a big chunk of it could put more spending money their pockets the next time they walk into one of Wal-Mart鈥檚 almost 5,000 U.S. stores.
聽image via Shutterstock
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