On a recent shopping trip to Costco, Lilly Neubauer picked up paper towels, lentils, carrots — and a home mortgage.
While Neubauer, 27, said she was surprised to find the warehouse club selling financial products, she and her husband saved about $200 a month by refinancing there this year. She also bought home insurance from Costco, she said, again because it was cheaper there.
"It opened us up to the fact that Costco is more than toilet paper," said Neubauer, who lives in Dallas.
As the nation's largest banks stay stingy with credit and a growing portion of the population has no bank at all, major retailers are stepping into the void. Customers can now withdraw cash at an ATM with a prepaid card from Walmart, take out a loan at Home Depot for a kitchen renovation or kick-start a new venture with a small-business loan from Sam's Club. This year, Walmart even started to test selling life insurance policies.
Consumer advocates are torn about the growth of this shadow banking industry. Financial products are making it into the hands of people who otherwise might not qualify for them, but these products are not always subject to the same regulations as bank products are. And to turn a profit, retailers generally have to charge more to people with poor credit or none at all.
For the retailers, banking products are not huge profit centers but a business strategy, meant to put money into customers' hands and get them buying more.
"You've got to remember, Walmart is intended to be a one-stop shop," said Charles M. Holley Jr., the company's chief financial officer.
Part of what lures retailers is the so-called underbanked population — people who use few, if any, bank services. The Federal Deposit Insurance Corp. estimates that amounts to roughly 10 million households.
Holley said that 20 to 25 percent of Walmart customers were unbanked.
Last month, Walmart unveiled a prepaid card with American Express. The card operates much like a debit card except that it is not attached to a bank account. It comes with free customer-service telephone support, and fees are relatively low, but the account is not backed by the FDIC.
Frustrated with the fees charged by her bank, Nancy Fry, a real estate broker in Logan, Utah, bought a prepaid card from Walmart this year. But this was even worse, she said — she was charged $3 every time she loaded money onto the card. "I really don't have very much money and can't afford these fees," she said.
Walmart began to test selling a one-year MetLife life insurance policy this year, and customers can wire money or pay bills at any Walmart store.
Costco is also courting customers who are fed up with their banks. "A lot of members think their bank fees are too high, or the trust level has gone down over the years, or they're having issues with debit and credit cards," said Jay Smith, Costco's director of business and financial services.
Costco sells auto and homeowners insurance, offers credit card processing for small businesses and began making mortgages in late 2010. It does not make money on the mortgages, which are offered by small lenders, Smith said. The idea is to get people to renew their store memberships, where Costco makes a large chunk of its profit.
Home Depot, whose customers are mainly homeowners, is trying to increase sales by extending credit to people who would otherwise have trouble getting it. Last year, the company began offering loans of up to $40,000, and this year it extended its no-interest credit card payment terms.
Dwaine Kimmet, Home Depot's treasurer, said the loans were especially useful for people who needed emergency items, like a water heater, though shoppers use them for other home decor projects as well.
Office Depot and Sam's Club offer loans backed by the government's Small Business Administration, and both involve quick, one-page initial applications.