How to Open a Low-Cost, Low-Income Bank Account

In April of 2020, the federal government began sending out millions of stimulus payments as a means of offsetting the tremendous economic damage Americans were experiencing as a result of the coronavirus pandemic. Simultaneously, unemployment claims were surging as the unemployment rate hit staggering new highs.

These funds are distributed as paper checks or electronic deposits, which – for many consumers – isn’t a problem. There is, however, a large population of Americans who are going to have to pay to access their money. These are people who don’t have a traditional bank account.

In 2017, an estimated 6.5% of American households were “unbanked” – in other words, they had no checking or savings accounts. Another 18.7% were “underbanked,” which means that they had a checking or savings account, but still used non-traditional financial products (like check cashing stores, money orders, and payday loans, for example). Between both segments, well over 30 million households were using often costly services to cash checks, send payments, and borrow money.

Those services can add up over time. So whether you’re hopeful for another round of stimulus checks or not, if you don’t have a bank account this is a good time to sign up and bring some added stability to your finances. To get you started, here are some resources and instructions for opening a low-cost, low-income bank account.

Why are so many unbanked?

Before examining your banking options, you first need to decide that you actually want a bank account. There’s no single reason why so many consumers choose to use non-traditional financial services in lieu of working with a bank or credit union, but there are a few major themes:

  • Distrust
  • Lack of familiarity
  • Poor past experience
  • Lack of financial stability

Some consumers simply don’t trust traditional financial institutions and may not feel safe sharing sensitive information or depositing their hard-earned cash. Some come from cultures where banking is uncommon and they aren’t familiar with how financial institutions work. Some may have had negative prior experiences that have become a barrier for their re-entry into traditional banking services. They may even think that not having a bank account can save them from things like debt collection or wage garnishment.

And there are some who may not have qualified for a bank account because their income was too low or too varied to be able to support the minimum deposit that some financial institutions may require. So while low-income banks and no balance accounts do exist, they may not be aware of these options.

In many cases, a little research and helpful information from a trusted source can make a big difference. Read up on the basics of banking, talk to a financial educator or counselor, and don’t hesitate to ask questions directly to your local bank or credit union.

What are the costs of being unbanked?

When you have ready access to a checking or savings account, you might take the movement of your money for granted. Depositing funds, transferring funds, sending secure payments, and even borrowing money (or accessing credit lines) are fairly standard things many of us do without much thought. But if you don’t have a banking relationship, many of those actions come with costs.

According to a NerdWallet survey, consumers would deal exclusively in cash spend an average of approximately $200 a year on check cashing and money order fees. A 1% check cashing fee for a $1,200 stimulus check would be $12, which is a significant amount of money – especially in the current environment.

So while there may be fees on your banking account (depending on the type of account), the cost in money and time for nontraditional options is almost always substantially higher.

How to find and open a bank account

Fortunately, there are a good number of low-cost, low-income bank and credit union options out there for anyone ready to make the leap. Here are three great resources to help you find the right option for your needs:

BankOn | BankOn collects a vetted list of low-cost bank and credit union accounts that can be opened online. | Learn all about credit unions and use the locator to find one in your neighborhood. You can look for low-income designated credit unions, which are often better positioned to help members who require access to low-minimum balance accounts and small dollar loans.

Independent Community Bankers of America (ICBA) | ICBA maintains a list of community banks that allow you to open bank accounts remotely and with a zero dollar starting balance.         

Every bank and credit union will have their own criteria for opening an account, but these are some of the things you should be prepared to submit when applying for an account:

  • Social Security number (or equivalent)
  • State-issued identification
  • Passport or other country-issued identification (if applicable)     
  • Contact information (address, phone, etc.)
  • Date of birth

The bank or credit union will almost certainly review your credit history, so it’s not a bad idea to take a look yourself before you apply. You can request a free copy of your report through

Depending on the account, you may also be asked to make an initial deposit, but there are some accounts that don’t require a balance if that’s an obstacle for you.

During difficult times, every penny counts. If you’re consistently spending money on check cashing and similar non-traditional banking services, consider opening a low-cost account to keep more of that money in your pocket (or checking account). 

Jesse Campbell is the Content Manager at MMI, focused on creating and delivering valuable educational materials that help families through everyday and extraordinary financial challenges.

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