America’s Growing Qualms About Banks


“I will lose my vehicle if I don’t get my money. My car note is past due.”

“They (Rushcard) make 94 cents every time a direct deposit hits, $2.50 every time you withdraw money and $1.00 every time you use the card.”

“No access to my money. Been waiting since Oct. 9th”

“This card only preys on poor folks who have messed up their credit and can’t get a regular bank account.”

These are among the comments posted on social media in response to technical issues facing RushCard, a prepaid debit card program founded by iconic hip-hop mogul Russell Simmons. This highly popular alternative to traditional banking has recently faced major criticism among its members due to paychecks and direct deposits failing to appear in their accounts. It also raises questions about whether services such as those offered by RushCard take advantage of people who, due to myriad reasons, may be unable or unwilling to secure a traditional bank account. “

Consumer advocates note that these hardships underscore the need for stricter rules to better govern the relationships between customers and services like RushCard. Of particular note here are agreements such as those under which prepaid cards generally fall, which provide those adversely impacted with little or no recourse in terms of suing the company.

In my opinion, card options like RushCard are simply digital check-cashing services in disguise. One of the appealing benefits of the card is that users get their money two days earlier than they would with a traditional bank. However, these benefits frequently come with what some might consider heavy fees for both direct deposits and withdrawals.

For a brief moment in 1985 while I was a young administrative intern working for a medical center in suburban Chicago, I experienced both the benefits and the disadvantages of a check-cashing company. They had a location onsite in the basement of my employer, and I found it convenient to scurry down on my lunch break and retrieve my money. But being naive at the time, it took me a month or so to realize that the benefit of immediately receiving cash in hand was outweighed by them pocketing nearly 10% of my check amount for the convenience of their service. Fortunately, a fellow intern tipped me off to a bank up the street that allowed me to facilitate future transactions for free.

Distrust of Banking Options?

Despite assurances from RushCard founder Russell Simmons that account balances and problems with the card will be corrected, many members are loudly speaking out about their woes on social media. Hundreds have had their lives adversely impacted by their inability to access their hard-earned money, with many vowing to flee the service once they are able to retrieve the monies due to them. And because of the slow response in correcting the issue, many are feeling like they are being bilked out of their money by celebrity who happens to be worth over $300 million.

RushCard and others of the prepaid variety are often sought out by minorities who are likely to be more trusting of a successful African-American role model like Russell Simmons than they are of the Big Banks. And for good reason, given the latter’s history of discriminatory lending practices and onerous fees. In fact, government investigations have found that lending practices such as ‘redlining’ – a form of segregation dating back to the 1930s that deprives minority homebuyers of fair housing opportunities – remains a problem, decades after passage of the 1968 Fair Housing Act.

According to U.S. census data, approximately 8% of American households lack a checking or savings account. Among African-Americans, that number is higher. According to a number of estimates, upwards of 20% are ‘unbanked’ because they don’t have enough money to maintain an account.

Ramifications for the unbanked are huge. Banks often charge to cash checks; for renters, fee-based money orders are the primary options of choice; and those without credit cards often have to resort to unreasonably high payday loans for emergencies.

Options Abound for Savvy Consumers

The good news is that free market innovations in the banking world offer a wealth of good options for those who do their homework and make informed decisions. Credit unions have long been a viable go-to choice in terms of free checking and saving accounts, even for those who lack the ability to qualify for a traditional bank account.

Michael Scott is an independent journalist and contrarian disrupter focusing on the intersection between free markets and economic freedom. He may be reached on Twitter @biz_michael