In a world that is increasingly tied to electronic transactions and centralized databases, those not making a proactive effort to use cash and stay outside the system are easily swept up by it if they’re not cautious.
For many necessary services – including but not limited to bill payment, housing purchases/rentals/leases, car rentals, online transactions and quite a few everyday business transactions – it is required (and certainly strongly preferred where not required) that one have either a bank account or credit/debit card, but more likely both.
For most, this is more than just convenience, but a prerequisite for full participation in society.
Yes, there are of course many determined individuals who go out of their way to secure their lifelines to food, shelter, clothing and currency without on-the-grid interactions, but this is hardly the norm.
Even those who use mostly cash still use bank accounts to prove credit, identity and status in the system. Then there are the lifelines to online account systems such as PayPal or eBay (most require bank accounts to play).
But what about those who don’t have bank accounts because banks have shut them out and won’t give them one?
It is a growing issue that is affecting millions of people who are being pushed into an underclass – many of whom are employed and striving – who have been blacklisted by banks and punishingly kept from being able to complete purchases and make payments. The NY Times profiled the struggle:
Ms. Williams, a 25-year-old resident of Queens, is one of more than a million Americans who have been effectively blacklisted from the mainstream financial system because they overdrew their accounts or bounced a check — mistakes that routinely bedevil young and low-income consumers, financial counselors say. While Ms. Williams paid back Bank of America the roughly $700 that she owed, a record of her youthful transgressions remains in a vast private database, preventing her from opening a new account.
Such databases, used by Bank of America, JPMorgan Chase and other big banks, were intended to weed out serial fraudsters. Now, regulators say, banks are screening out potential customers and swelling the ranks of the so-called unbanked — the roughly 10 million households in the United States that lack even a basic bank account.
Ironically, and shamefully, the very banks that took taxpayer bailouts after overextending and defaulting on their own obligations – largely in the insane and ill-advised derivatives market where they used other peoples’ money to gamble – are now denying digital participation in society to those who have been flagged for over-extending their personal money and getting too many overdrafts.
While it may not be the most responsible action, going into the red is a reality for millions of young people starting out with less-than-stellar financial discipline and for millions more struggling at or near the poverty line with low-paying jobs or underemployment. Spouses and relatives who are financially linked to blacklisted non-bankers have been drawn in and shut out of the system as well.
Closed accounts and records of outstanding issues with one bank is now enough to haunt someone for years as they seek acceptance with other major financial institutions – including the likes of JP Morgan Chase, Bank of America, etc. – who are linked together through common databases and policies.
Being flagged in the ChexSystem, and other credit databases, makes life that much more difficult for those already stuck in the backwaters of low, slow or depressed prosperity.
The NY Times explains that those who’ve stumbled in their accounts have often been lumped into the same untouchables category as those who’ve deliberated committed fraud or used bunk credentials – unable to qualify for bank accounts:
…even people who had overdrawn their account, or bounced a single check, were routinely excluded, according to people briefed on the matter. When Capital One began examining its own use of the databases after being contacted by the attorney general, it realized that the disqualifications were too broad, the people said.
The consequences of mistakes — negative marks typically stay in the databases for at least five years — are far too extreme, financial counselors and regulators say.
Try getting ahead and avoiding government hand-outs with no checkbook to pay bills, no bank account to qualify for apartments, home, transportation, insurance, etc.; no proof of income (often based on residence with a major financial institution) and no convenient way to deposit and spend earnings for necessities through the increasingly online and electronic dependent economy that often requires credit cards or perhaps automatic payments … go ahead, just try it.
At a minimum, it means costly extra fees and hassles to cash checks, take out money orders, prove identity… and really, just function without losing over the stress.
Officials in New York are now looking at the problem and trying to convince banks to relax their standards. “We are extremely concerned about it because people who have made small errors are driven onto the margins of the financial system, where they really can’t save for the future,” New York City’s Commissioner for Consumer Affairs Julie Menin told the Times.
But changes may not be overnight.
Those grounded by a philosophy and determined enough to live largely disengaged from this system should not only count their blessings for their disposition and status, but realize the precarious position of those living trapped in a system that does not serve them.
It should also serve as a warning about the power society has given to databases — they have amassed unbelievable amounts of data into a centralized system that has been trusted not only to keep and collect personal information about us all, but to also make value judgements about us on behalf of a banking, business and political class that has proven itself to be above the law, beyond reproach and ruthlessly indifferent about the little people caught in its net and dependent upon its offerings.
Thus, it would be prudent for those who can to gradually wean themselves from this system where they can: operate with cash when possible, respect businesses that respect cash and privacy; plan more spending outside of the banks, use credit unions or local banks instead of the majors of Wall Street, while strictly monitoring any credit/debit purchases to make sure you are not exceeding your account balances; seek alternative arrangements and credit lines if possible (such as small loans from trusted friends and family members), and transition to them on your own terms and not when marginalization from the system forces you to it out of desperation.