Banking at Walmart

Walmart - Green DotA couple of months ago I recommended Spent: Looking for Change, a 2013 documentary – sponsored by American Express and narrated by Tyler Perry – which focused on everyday Americans shut out of the finance system most of us take for granted. Available for viewing on the Spent Movie website and YouTube, the documentary noted that many of these Americans turn to pawn shops, check cashing services; and use payday and title loans to meet basic financial needs.

Of course the practice is quite costly. It has been calculated that $89 billion a year goes to fees and interest for using these types of alternative financial services.

The People Vs. the Bank of Walmart [The Daily Beast]

According to the Pew Charitable Trusts’ Safe Small-Dollar Loans Research Project, an estimated 12 million Americans take out payday loans each year. On average, these borrowers take out eight loans per year, averaging $375 each. The fees over the course of a typical two-week loan? They averaged $15 per $100 borrowed, amounting to a 391% annual percentage rate.

This film stresses that it is time for change. The idea is that new technology, new ideas and encouraging dialogue around this issue can help make managing money simple and more affordable.

The Unbanked: Offering Small Fees, Banks Cater to Low-Income Customers [NY Times]

Payday LoansIt now looks like there may be another option, a low-cost alternative to traditional banking accounts from … wait for it, wait for it … Walmart. That’s right. After years of being stymied by the well monied banking industry, Walmart is making its biggest foray yet into everyday financial services by teaming up with Green Dot – a company known for its prepaid payment cards – to supply checking accounts to almost anyone over 18 who passes a simple identification check.

According to a Walmart spokesperson, the accounts are intended to be low-cost alternatives to traditional bank checking accounts, with no fees for overdrafts or bounced checks and no requirement for a minimum account balance. The new accounts, called GoBank, will cost customers $8.95 a month if they have direct deposits totaling less than $500 a month and will be available nationwide by the end of October.

What do you think? Will Walmart’s latest effort to break into the banking industry be successful for them and will it help those that might otherwise be shut out of the traditional banking system?

Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.

8 Comments

  1. It’s an “interesting” idea. There must be a market for it, if they are going to offer that service. We will see how long it the benefits of this account lasts.

    • Good points, Tennille. I don’t think there is any doubt there is a market for this service and it is always possible – likely? – that they will modify the benefits in some way after a period of time. Thanks for taking the time to stop by and join the conversation.

  2. First I will say that I have seen the documentary and it’s not just people that messed up when they were younger. There are some that really had their stuff together and life just threw them a curve ball so they had to readjust. It’s really amazing how much banks take advantage of people though. I highly recommend it.
    As far as Wal-Mart getting into the game, I agree with the Google Reader wondering how long Wal-Mart will keep overdrafts feeless. I think this is a ploy to suck people in. That being said, it’s good that they can help people get started in the interim. I hope it gets people on the right path.

  3. Walmart’s been trying to get into banking for years — looks like they finally found a path. I like that it’s FDIC-insured. It’ll be interesting to see how this plays out.

    • If you get a chance, you should check out the documentary – Spent: Looking for Change – I reference in the post. It really shines a light on those that are underserved, not part of the traditional banking system and end up paying the price. If this helps those that have been traditionally shut out of the system, it will be a good thing.

  4. Well, okay. We have President’s Choice (PC Financial) here in Canada so why not?

    • There could be benefits for those that have been shut out of the traditional banking system. Yeah, so why not.

  5. A Google+ reader notes …

    “I wonder how long the no fees for overdrafts or bounced checks will last? I could see that being abused.”

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