The Major Drawback of Living Without a Checking Account

Having a checking account makes it easier to keep track of your money in many ways. However, millions of Americans still function without one. Today, is it really possible to get by without a checking account? In a way, yes. But there is one big problem that should make you think twice before you close your account.

Why Have a Checking Account?

First, let’s review the key benefits of holding a checking account:

• Convenient access to your money. With a checkbook and debit card connected to your account, you can easily pay for purchases or withdraw cash from ATMs.

• Paying bills You can pay all your bills seamlessly through online bill pay, checks, or automatic deductions No need for money orders.

• Direct deposit Your paycheck and other income can be directly deposited into your account No need to wait in line to cash checks,

• FDIC insurance. Your money is protected against bank failure. The FDIC insures accounts up to $250,000 per depositor.

• Earning interest. While not substantial, many checking accounts earn a small amount of interest each month.

• Money management. Your statement helps you track spending and builds a financial history.

Given these benefits, it’s no wonder that 92% of American households have a checking account. But if you’re part of the 8% without one, is it really a big deal? Let’s weigh the pros and cons.

Is It Possible to Live Without a Checking Account?

The simple answer is yes. With some combination of the following options, you can get by without a dedicated checking account:

• Prepaid debit cards are cards that can be loaded with money and work like debit cards but aren’t connected to a bank account.

• Cash – Using physical currency for purchases and bills.

• Money orders – Paper checks purchased with cash and used to pay bills.

• Check cashing services – Businesses that cash checks for a fee without requiring an account.

• PayPal, Venmo, etc. – Digital wallet apps to send, receive, and withdraw money.

• Direct bill pay – Some companies accept online or automatic payments directly from a credit card.

So in theory, it’s completely possible to live cash-only and utilize the services above for your banking needs. But just because you can manage without an account doesn’t mean you should.

The Major Disadvantage: No Financial History

One of the worst things about not having a checking account is that you can’t keep official records of your spending, income, payments, budgeting, or saving. A checking account from a bank gives you monthly statements that show how you’ve been managing your money over time.

Without this bank record, here are some scenarios where not having a checking account can hurt you:

• Applying for loans or credit cards – Lenders want to see your bank statements to verify income sources and assess how responsibly you manage money.

• Renting an apartment – Landlords often require proof of income through bank records.

• Building credit – Maintaining a checking account responsibly helps demonstrate financial trustworthiness.

• Qualifying for a mortgage – Bank statements help verify assets, regular income, and spending habits.

• Self-employment – Business owners need to prove income and business-related spending.

• Budgeting and money management – Account statements make it easier to track expenses, stick to a budget, and set savings goals.

• Fraud disputes – Official records help verify unauthorized charges or fraudulent activity.

• Financial emergencies – Account history helps verify income loss or the need for hardship assistance.

• Investing and retirement planning – Investment companies want to see your banking history as part of assessing your financial situation.

Without the paper trail provided by bank checking account statements, it can be very difficult to accomplish financial activities like the examples above.

Weighing the Pros and Cons of Skipping a Checking Account

As we’ve covered, it is possible to live cash-only…but the biggest disadvantage is the lack of financial documentation and money management benefits that a checking account provides. Here’s a quick recap of the key pros and cons:

Pros

• Avoiding account fees and minimum balance requirements
• More “privacy” – no official record of spending
• More conscious spending when limited to cash on hand

Cons

• No financial history – major difficulty qualifying for credit/loans
• Higher risk of loss/theft with cash
• More expensive bill pay with money orders
• No accounting of income/spending to aid money management
• No FDIC insurance protection on funds
• Difficulty building credit history and financial trustworthiness

Overall, the cons seem to outweigh the pros when it comes to skipping out on a checking account. The lack of financial history can seriously limit your opportunities and abilities when it comes to accomplishing financial goals and milestones down the road.

Final Takeaway

Living without a checking account might seem easier and hassle-free. But the biggest disadvantage is the lack of official documentation of your financial life. For most people, the benefits of convenient access to money, built-in money management, and qualification for credit/loans that a checking account provides are well worth the small fees.

So if you’re on the fence about closing a long-unused account, think twice before going completely without a checking account. Find an account with low fees and minimum requirements, and utilize it periodically to maintain some financial history. This will prevent major obstacles when you need to demonstrate responsible money management down the road!