On the first or second day of every month, Sandra Alexander leaves the housing project in Northeast Washington where she lives with her nine children and takes a bus downtown.

Her objective is a relatively simple one--to cash her monthly assistance check and take care of some bills. But for Alexander, who doesn't have a checking account, it is no small chore.

To pay her rent she uses money orders, for other groceries and bills she pays cash. And once a month, when her assistance check arrives in the mail, she takes a 35-minute ride into the city to a bank she knows will cash her check for free.

Sandra Alexander, 38, is one example of an underground economy where checking accounts are nonexistent and money means only cash. It is a world outside the regular banking system with its cash cards and electronic banking, a world that seems far removed from the traditional ways of the middle class.

Cash-only consumers include a wide range of people, most of them poor, from taxi drivers who distrust institutions to senior citizens who like the feel of hard currency in their pocket. Many don't speak English or speak it so poorly that they can't cope with bank accounts, while others have trouble reading or writing. Some simply believe that checking accounts cost too much.

Sidney J. Levy, a Northwestern University professor who has studied the cash economy, has a term for some of its practitioners. He calls them "localites."

"These are people who, because of their orientation, were geared to working in the cash economy in their local neighborhood," said Levy, chairman of the marketing department at Northwestern's J.L. Kellogg Graduate School of Management. "Localites don't see themselves related to the larger world in which they would use the mail to pay the utility bill, for example. Instead they stay within their neighborhood, getting their check cashed there and then paying the bill in cash at the corner store."

The size of the cash-only group is hard to measure.

Levy estimates that up to 30 percent of the people living in a given community don't have checking accounts. Studies by the Federal Reserve Bank in 1980 indicated that about 20 percent of American households don't have checking accounts. But the numbers are likely to increase, Levy predicts, with the spread of electronic banking and higher checking account costs--two developments that will require consumers to be more sophisticated and more affluent than in the past.

"These people have been written off by many financial institutions . . . because if the individual doesn't have any money, he can't open a NOW account and he can't have an IRA . . . so it's misery left lying," said Vera Thompson, a community activist who works in Northeast and Southeast Washington and chairs the Ward 7 Commission on Aging.

With the cost of servicing the checking account still rising--the average rose from $3.07 a month in 1975 to $5.09 a month in 1980--and with the national economic woes continuing, banks feel compelled to seek out profitable accounts and maintain earnings.

Joseph H. Riley, chairman of NS&T Bank, explains the banks' dilemma this way:

"We are interested in the community as a whole, so we try to bring our service to everyone. But we are not government and we are not nonprofit, so we must have cost recovery. And, in the future, banking will be more directed toward pricing for services offered . . . whereas in the past, large depositors subsidized small depositors. That isn't happening anymore."

NS&T, in fact, along with Riggs National Bank, is given good marks by Thompson for trying to reach into low-income areas to educate residents on the use of banking services and to help them overcome their fear of banks. They do this, she said, by sending representatives to talk to small groups and explain how checking accounts work and answer questions about banks.

A few banks such as Madison National Bank also offer free checking services. NS&T has free checking for those aged 65 and older.

For someone with a checking account, bill-paying can be reduced to a fairly simple and convenient routine by sitting down once or twice a month and writing out checks for the rent, utilities and other obligations. But for those who don't have checking accounts, check-cashing and bill-paying typically mean long lines and time-consuming trips.

Every two weeks after James Cary, 49, receives his paycheck from the Northeast apartment complex where he works as a porter, he goes to a liquor store that doubles as a check-cashing community center. Sometimes a friend who has a car drives Cary to the liquor store; sometimes Cary rides the bus. Once there, Cary waits in line for his turn to convert check into cash. His fee is about $3 per paycheck, or 1 percent of the amount of the check.

"We're a poor man's bank," said Louis Richardson, owner of Moe's on H Street in Northeast, one of a number of liquor stores that operate in Washington's less prosperous areas and function as surrogate banks. But because they are not real banks, these check-cashing centers aren't required to have special licenses or abide by any special banking regulations.

Generally, the centers will cash checks for customers who have the proper identification card for a fee of 1 percent of the amount of the check ($3 for a $300 check, for instance); customers who don't have the identification cards typically pay 2 percent ($6 for a $300 check). Centers also sell money orders and distribute food stamps.

Richardson estimates that about 7,000 people come through his center every month. What they find is a bare, dusty room with walls crammed with photographs of people wanted for cashing bad checks. Printed instructions take up the rest of the wall space: "Count your change before leaving the cashier," "All transactions are being filmed" and "$10 return check charge."

Liquor stores aren't the only establishments willing to cash checks, however. Some food stores also will cash checks for regular customers.

Franklin Stewart, 76, pays a friend $5 to drive him from the senior citizen center where he lives in Northeast to the grocery store where he cashes his Social Security check each month. Stewart turns over his check to the store to pay for the groceries he has charged; the store takes the check and gives him the difference in cash. He said he doesn't have to pay a fee that way.

Some cash-only consumers are particularly resourceful.

Alexander, for example, has learned that she can cash her income check free if she takes it to the NS&T Bank, where it is drawn. She estimates that she saves about $5 in check-cashing fees by going to the bank rather than the liquor store. And while she is at the bank, she pays her utility and telephone bills in cash, thereby eliminating the need to spend $1.50 on three money orders and 60 cents on postage to mail in the bills.

That works out to a total savings of nearly $6 after she pays her $1.20 roundtrip bus fare.

"I can buy a lot of food for my kids with that," Alexander said.

Once cash-only customers have found ways to convert their checks into cash, they have another problem: Keeping the cash away from thieves and muggers. To reduce the risk of robbery, many people have developed strategies to protect themselves.

"I try not to draw attention when I go out," said Colonel ("my name, not my rank") Williams, 73, who lives at a senior citizen center on East Capitol Street NE. "When I do go out, I avoid public transportation. I don't stand in crowds, where there might be pickpockets. And I be halfway alert so I can spot things."

Williams, a stubby figure with a gold chain around his neck, has a relative take him to cash his check each month and return him to the center. On this particular day he was just back from a trip and worried about the money he was carrying. "I am standing around now with too much money in my pocket," Williams said as he headed for the elevator and the security of his upstairs unit.

So far the precautions have worked for Williams, but Cary, the apartment porter, has been robbed twice.

"Once at gunpoint and once by brutal force and the robbers got my money both times," said Cary, who has continued to operate on a cash-only basis despite his two losses. "I thought about getting a checking account, but if I did, I'd probably be carrying my checkbook around and be losing it."

For one 35-year-old taxi driver who hasn't had a checking account in years, the issue isn't crime or time. It is concern over the temptations of checking account use and institutional punishment for abuse. Here is how he explains it:

"You go out on the weekend and see something you want and write a check for it. Then something happens and you don't get to the bank on time and the check bounces and they charge you $15. I don't need that."