Personal Finance: Buy a toaster, get a checking account

photo Chris Hopkins

The world's largest retailer recently announced a new and intriguing product that may resonate with many of its customers. Beginning in late October, Walmart will begin promoting low-cost checking accounts to a broad swath of its customers who lack access to a traditional banking relationship. While the move is clearly intended to draw more shoppers into the mega-retailer's stores, the new offering could prove to be a gateway for millions of American adults into the financial mainstream.

The new product dubbed GoBank is a low-cost, fully functional checking account being made available to Walmart customers through California-based Green Dot Corp., a big player in the prepaid debit card business. Unlike most traditional bank accounts, the new GoBank checking account imposes no overdraft or returned check fees, and assesses no monthly maintenance fees if the account holder makes at least one $500 electronic deposit per month. The fee is $8.95 per month otherwise.

The account comes with many features normally associated with traditional retail bank accounts, including a MasterCard debit card, mobile check deposit feature, and free online bill pay. But unlike most traditional bank accounts, a GoBank checking account has no minimum balance requirements and no overdraft fees. Customers may deposit cash at Walmart stores, and have access to a huge network of 42,000 no-fee ATMs.

Walmart's motivation for the service is obvious: making it easier for shoppers to spend at its stores. The company knows that many of its customers have never had a bank account or have had unfortunate experiences with previous banking relationships. The new account does not rely upon traditional credit checks or checking databases, but instead utilizes a proprietary qualification methodology that allows virtually anyone with a valid ID to establish an account, regardless of past banking history.

In this case, what is good for Walmart is clearly good for its clientele. According to research from the FDIC, 10 million U.S. households do not have a bank account, encompassing 17 million adults. Unbanked families often rely instead on high-cost financial arrangements like money orders, prepaid debit cards, check cashing services and payday loans, frequently racking up hundreds of dollars in annual fees that they can ill afford to spend. The new GoBank account holds the potential to obviate most of these expensive alternative transaction channels.

The low cost of the account should appeal as well to many lower-income families who already have existing bank accounts. According to a Walmart press release, a typical retail bank checking account costs between $218 and $314 per year in fees and charges, not counting bounced check expenses. That could easily equate to two or three carts full of groceries. That ain't chicken feed.

GoBank also offers some tools to help with household budgeting. Set up a monthly budget, and GoBank will help you track expenses and notify you if you are exceeding your planned outlays with a gentle reminder.

A starter kit is available at Walmart stores for $2.95, and includes a temporary debit card to use until your permanent card arrives in the mail. The offering is creative, and holds the potential to help bring lots of unbanked households into the mainstream of the financial system. And the price is right.

Christopher A. Hopkins, CFA, is a vice president at Barnett & Co. Investment Advisors.

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