No Banks for the Poor

Economic times are tough, and people all across the economic spectrum are finding themselves facing new difficulties. More than one million households in the United States lost access to basic banking needs in the last year, according to a recent report by bank regulators. This number adds to the already 30 million households in the U.S. that already don’t have access to banking services, or who have little access.

Those figures represent the number of households that don’t have bank accounts altogether, or that regularly use other services as an alternative to banks. Some of the services include payday loans and check cashing services. All told, more than 25 percent of households are affected by this phenomenon. Among the hardest hit households are those who are poor, members of a minority, or immigrant families.

Access to a basic bank account is an important component of financial stability and security. A bank account lets a financially vulnerable family be able to save up for emergencies, as well as take out loans on terms that they can afford.

Unbanked and Underbanked

The FDIC classifies these households into two different groups. The first group is known as “unbanked.” Unbanked households are households that don’t have a checking or a savings account for anyone living in the house.

Underbanked households are a step up, but not too far. Underbanked households are those that may have a bank account but that regularly use more expensive forms of credit, such as check cashing services, pawn shops or payday loans.

While underbanked families are in a little bit better position than unbanked ones, there is concern that these families, too, are relying on those more expensive forms of credit. Accordingly, there is a move at the FDIC to encourage banks to open up their services to these kinds of customers.

How Income Factors In

Native American, Hispanic and black families are more likely than whites to fall into one of these two categories. In addition, approximately 71 percent of unbanked households bring in a total of under $30,000 per year. This is a staggering figure, and demonstrates that there are just too few services in the traditional banking area that are available to poorer households.

Payday loans are a viable option for these folks. Payday loans provide instant access to funds for basic need

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