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Published: Saturday, 6/30/2007

No deposit, no return

IT USED to be that if something was rock-solid, an absolute certainty, one might say you could take it to the bank. But a surprising number of Americans don't take anything to the bank - especially their money.

How many people, exactly, choose to stuff their savings under the mattress, or avail themselves of check-cashing centers on payday, is uncertain. Wal-Mart Stores, Inc., which is getting into the finance business in a big way, reckons about 20 percent of its customers, or 36 million people - don't have a checking account.

Federal numbers suggest the figure is about 28 million people, with the Federal Reserve saying around one in 12 families doesn't have an account.

Pick whichever figure you want, and the conclusion is the same: A dramatic number of Americans for one reason or another choose not to use an institution that the majority take for granted - their local bank.

The reasons people don't use a bank are many. There's a distrust of big financial institutions, or possibly a cultural or language reason for not going to a bank. Many people seem to be afraid of what they'll be charged if they overdraw their account, or write a check with insufficient funds.

Unfortunately, not having a bank safeguard their income or savings can be hazardous to their financial health.

There's the risk of losing money to a burglary or robbery if large sums are kept at home or carried on their person.

There are the huge fees charged by pay-day lenders and check-cashing outlets. A Consumer Federation of America survey found it cost an average of almost $20 to cash a check of less than $500 at check-cashing outlets.

Those not using banks are thought to be for the most part minorities, low-income, and young. The Federal Reserve says data from 2004 show that almost a quarter of families earning under $18,900 have no bank account.

Managing a bank account takes time and demands accuracy. Mistakes can cost a significant amount, and for low-income families those costs may be enough justification for opting out of the system.

There's a lot of money earned and saved outside the banking system, possibly as much as $510 billion a year. Financial institutions would undoubtedly like to get more of that in their vaults, and it would almost certainly be in the best interests of low-income families to work through a bank to manage their money, thereby avoiding the risks of becoming a victim of crime, or of predatory lenders.

Wal-Mart recently announced its plans to offer a prepaid debit card and other financial services in 1,000 stores, as a means of providing such services without opening its own bank - something regulators last year disallowed.

However, with so many people already skittish about and possibly fearful of banks, and resentful of all those fees, those institutions will need to tread lightly and offer creative products if they are to woo new customers.

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