More than three million New York City residents are getting Economic Impact Payments through the American Rescue Act signed by President Biden this month. Most are receiving direct deposits to their bank accounts, and a batch of payments were sent this week as debit cards and checks.

But for an estimated 350,000 city households who don’t have bank accounts, paper checks are an added expense. In New York state, check cashing businesses can charge up to almost 2.3%. Experts say that’s a real burden on low-income people, those least likely to have a bank account, or what’s known as the “unbanked.”

“A family of four getting their checks will have to pay over $127 in fees,” said Jonathan Mintz, president and CEO of the Cities for Financial Empowerment Fund. “And then they have to start buying money orders to convert the cash that they just paid to get into instruments where they can start to pay their bills.

“So being unbanked is expensive. It is a hassle. And to be frank, during COVID, it also risks your health because you have to do all of this stuff in person.”

Mintz’s organization works with financial institutions to develop free and low-cost bank accounts, which are certified through a program called Bank On. There are more than 70 of them across the country including some that can be opened online. The FDIC also has a #getBanked campaign.

A Bank On approved account has strict requirements. It can't cost more than five dollars a month, and can’t charge overdraft or insufficient fund fees. There has to be a way to pay bills with it, too. Bank On accounts are also encouraged to accept alternative forms of identification like IDNYC.

Of course, five dollars a month is still real money for the poorest New Yorkers. But Mintz said this fee ensures banks take the accounts seriously. He said many do charge less, and one from KeyBank is free.

The City’s Department of Consumer and Worker Protection has also worked with local banks to create six low cost accounts. Commissioner Lerelei Salas said the agency offers free counseling to low income New Yorkers not only to access banking, but also tax preparation services that can help them get federal stimulus funds they may have missed.

“We've seen people in the past who didn't file a tax return, because maybe their income was too low and they didn't need to file a tax return,” she explained. “But for that reason, they also may not have been on the radar of the federal government, right? And missed out on stimulus checks.”

The Department of Consumer and Worker Protection commissioned the 2017 survey finding 354,000 city households don’t have bank accounts. At 11.2%, that was almost double the national figure but slightly lower than it was in 2015 at 11.7%. The survey also found almost 690,000 additional households have bank accounts but also use check cashing and other services with fees like pre-paid cards.

“These are people who are generally lower income,” said Mintz, a former city consumer affairs commissioner. “Often they have uneven streams of income. And so they are worried that a bank account might be too expensive, that if there's a bad month there might be surprise fees like overdraft and insufficient funds fees.”

Unbanked residents tend to be concentrated predominantly in communities of color and low-income neighborhoods, according to the city. They include undocumented immigrants, even though many can open bank accounts with IDNYC. They also include the homeless.

Three years ago, Nadine Borowka said she lost her apartment and then her bank account. Because of COVID-19, the city moved her from a homeless shelter into a hotel on the northern edge of Bedford Stuyvesant. Borowka said she gets by on disability and social security checks, which she takes to a local Community Financial Service Centers check-cashing business.

“I can’t get a bank account right now because I have no photo ID,” she said, explaining that she’s trying to get her government payments switched from checks to debit cards to save money. But she’ll have to cash her $1400 stimulus check, and at CFSC she’ll pay $31.22.

“It’s too much, every time you cash a check you have to go through this,” she said.

Listen to reporter Beth Fertig's radio story for WNYC:

The Brookings Institution estimates 3 million paper checks from the first stimulus last year went through check cashers who charged a total of 66 million dollars in fees. Checks also tend to arrive later than direct deposits, according to a report by the Urban Institute.

But even at a time when people are transferring money through apps like Venmo, there are New Yorkers who prefer the anonymity of cashing a paper check — sometimes out of fear.

44-year-old Miguel Laureano mistakenly thought the government could take his stimulus payment if he put it into a bank account. “My wife owes money for student loans,” he said outside the check cashing business where he takes his paychecks. “And the IRS has been killing us. They don’t stop collecting.”

The federal government is not deducting any money from this third round of stimulus payments. State Attorney General Letitia James issued new guidance clarifying that stimulus payments authorized by the American Rescue Plan are exempt from garnishment under New York law. However, her office said this guidance does not apply to any actions taken by the state of New York, including, but not limited to, actions to collect past due child support.

As for student loans, Adam Minsky, a Massachusetts-based attorney who works with borrowers and families, said the main danger “is if someone has a defaulted loan with an outstanding judgment” from a court.

Laureano isn’t taking any chances. He said he and his wife are both managers at different branches of McDonald’s, and that their hours were reduced last year. They could really use the stimulus money, he explained.

“I already owe March’s rent,” Laureano said. “I just finished paying February’s rent.”

But if he takes the $2,800 in combined stimulus checks they’ll receive to the same check-cashing place where he brings his paychecks, they’ll have $62.44 less for rent, due to the fees.

Beth Fertig is a senior reporter covering the city’s recovery efforts at WNYC. You can follow her on Twitter at @bethfertig.