Why do I still need to use a check-cashing service if I already have a bank account?

This often comes down to a specific gap, such as the bank placing an extended hold on certain deposits, not having a nearby branch or ATM, or simply being more familiar and comfortable with a check-cashing service. Asking the bank directly about its hold policies and nearby access points can sometimes resolve the specific reason for relying on an outside service.

Does being underbanked affect my ability to send money internationally?

Not necessarily, since most money transfer services work with a standard checking account for funding a transfer. If an account has specific limitations, checking with the transfer provider about alternative funding methods, like a debit card, can help find a workable option.

Will building credit help me become less underbanked?

Often, yes. Many of the specific gaps that lead to being underbanked, needing a prepaid card instead of a credit card, or lacking overdraft protection, are tied to limited credit history. Building a stronger credit history through consistent, responsible use of existing accounts typically makes more banking features available over time.

Back to Glossary

Underbanked: you have an account, but it isn’t covering everything

Key takeaways
- Being underbanked means having a bank account but still relying on alternative financial services, like check cashing or a prepaid card, because the account doesn’t fully meet actual needs.
- The FDIC’s household survey defines this specifically: a checking or savings account plus use of at least one nonbank financial service in the past 12 months.
- This is distinct from being unbanked, which means having no account at all.
- A limited credit history, language barriers, or a bank’s hold policy are common reasons an account holder still turns to alternative services.
- Building a track record with an existing account often unlocks features that close much of this gap over time.

Relying on check cashers, prepaid cards, or other services outside a bank despite having an account is a more common situation than it might feel like, commonly called being underbanked. Here’s what it means and what the options look like.

What is underbanked?

Being underbanked means having a bank account, but still relying on alternative financial services, such as check cashing, money orders, or a prepaid card, because the account doesn’t fully meet actual needs. The FDIC’s household survey⁠(opens in new window) considers a household underbanked if it has a checking or savings account but has also used at least one of several nonbank financial services in the past 12 months, including check cashing, money orders, and international remittances sent outside a bank account. This is distinct from being unbanked, which means having no account at all.

How being underbanked affects everyday finances

An underbanked household might have a checking account but still use a check-cashing service for a specific paycheck, perhaps because of a hold the bank places on certain deposits, or because of limited access to a nearby branch or ATM. Someone might rely on a prepaid card for budgeting or for a family member without their own account, or use a money order for a specific bill a landlord or utility insists on receiving that way. Each of these alternative services typically carries its own fee, meaning being underbanked, over time, often costs more in cumulative fees than fully using a bank account’s own built-in tools would.

Being underbanked as an immigrant or newcomer

Many immigrants find themselves underbanked even after successfully opening a bank account, often because of gaps between what the account offers and what their specific financial life actually requires. A limited credit history can mean being approved only for a basic account without a credit card or overdraft protection, pushing toward a prepaid card or cash for purchases a credit card would otherwise cover. Language barriers can make a bank’s mobile app or customer service difficult to use confidently, leading some people to rely on simpler, if more expensive, alternatives they understand better.

Recognizing that being underbanked is often a solvable mismatch, not a permanent state, helps in looking for the specific fix. Many banks offer a wider range of account features once a track record is built, or once specifically asked about what’s available, that can close much of this gap over time.

Community context

The specific reason someone is underbanked shapes which fix actually makes sense. Someone underbanked because of a thin credit history has a different path forward than someone underbanked because of a language barrier with their bank’s digital tools, or someone whose nearest branch is simply too far away for practical everyday use. Recognizing the specific gap, rather than treating “underbanked” as one single problem, points toward the right specific solution.

How to move from underbanked toward fully banked

Ask the bank directly what’s limiting the account. Understanding whether it’s a credit history issue, a specific account type, or something else clarifies what to work on to access more of what the bank can actually offer.
Explore free or low-fee alternatives the bank already offers. Many banks provide free money orders, cashier’s checks, or other services for account holders that eliminate the need to pay for a similar service elsewhere.
Build a track record with the existing account. Consistent, responsible use can open the door to additional features, like a credit card or overdraft protection, that reduce reliance on outside services.
Ask about accounts specifically designed for building credit or a stronger banking relationship, such as a secured credit card offered by the same bank, which can be a natural next step once an account is established.

Why underbanked households are so common

Being underbanked is far more common than many people realize, and it isn’t limited to any single group. Someone with a checking account but a thin credit history may still be denied a credit card and turn to a prepaid card instead. Someone paid partly in cash, common in certain industries, may still need occasional check-cashing or money order services even with an active bank account. Recognizing that being underbanked usually stems from a specific, identifiable circumstance, rather than a personal failing, helps remove some of the stigma that can otherwise discourage someone from working toward closing the gap.

The particular risk of relying on nonbank credit products

One category of underbanked behavior deserves particular attention: relying on nonbank credit products like payday loans, pawn shop loans, or rent-to-own arrangements to meet borrowing needs a bank account alone doesn’t address. These products often carry considerably higher costs than mainstream credit, and relying on them regularly can create a cycle that’s difficult to escape. Someone regularly turning to one of these products despite having a bank account is worth treating that pattern as a signal to specifically pursue mainstream credit-building options, such as a secured credit card or a credit-builder loan through a bank or a local credit union, rather than continuing to rely on considerably more expensive alternatives.

How technology has changed the underbanked landscape

The rise of mobile banking apps, peer-to-peer payment services, and fintech products marketed specifically to underserved households has changed some of the traditional reasons people stayed underbanked, while introducing new considerations of its own. Not every fintech product carries the same consumer protections as a traditional FDIC-insured bank or NCUA-insured credit union, making it worth confirming a specific provider’s insurance status and regulatory standing before relying on it as a primary financial account, particularly for holding significant savings.

Common questions about being underbanked

Why do I still need to use a check-cashing service if I already have a bank account?

This often comes down to a specific gap, such as the bank placing an extended hold on certain deposits, not having a nearby branch or ATM, or simply being more familiar and comfortable with a check-cashing service. Asking the bank directly about its hold policies and nearby access points can sometimes resolve the specific reason for relying on an outside service.
Does being underbanked affect my ability to send money internationally?

Not necessarily, since most money transfer services work with a standard checking account for funding a transfer. If an account has specific limitations, checking with the transfer provider about alternative funding methods, like a debit card, can help find a workable option.
Will building credit help me become less underbanked?

Often, yes. Many of the specific gaps that lead to being underbanked, needing a prepaid card instead of a credit card, or lacking overdraft protection, are tied to limited credit history. Building a stronger credit history through consistent, responsible use of existing accounts typically makes more banking features available over time.

In Summary

Being underbanked usually reflects a specific, identifiable gap between what an account offers and what a financial life currently needs, rather than a permanent limitation, and understanding the specific gap helps in finding the right fix. Asking the bank directly what’s available, and building a track record over time, often closes much of this distance.

This publication is provided for general information purposes only and is not intended to cover all aspects of the topics discussed herein. This publication is not a substitute for seeking advice from an applicable specialist or professional. The content in this publication does not constitute legal, tax, or other professional advice from Remitly or any of its affiliates and should not be relied upon as such. While we strive to keep our posts up to date and accurate, we cannot represent, warrant, or otherwise guarantee that the content is accurate, complete, or up to date.