Breaking Down Barriers for the Unbanked and Underbanked

In the United States, approximately 8.4 million households are unbanked, meaning they have no bank account at all.

The unbanked often rely on alternative financial services, such as check cashers and payday lenders, which can charge exorbitant fees and interest rates.

These services can be expensive and even predatory, making it difficult for the unbanked to access basic financial services.

The unbanked also face challenges in managing their finances, as they are more likely to use cash and less likely to have access to financial tools and resources.

The unbanked are households that don't have a traditional bank account. They're often lower-income households and less-educated households.

These households are more likely to be Black households, Hispanic households, American Indian or Alaska Native households, working-age disabled households, and single-mother households. The FDIC's 2021 National Survey of Unbanked and Underbanked Households found that these groups are disproportionately represented among the unbanked.

The FDIC also reports that the unbanked rate is higher in these groups due to various factors, including limited access to financial services and lack of trust in banks.

Here's a breakdown of the groups most affected by unbanked status:

It's worth noting that the FDIC's 2021 National Survey of Unbanked and Underbanked Households found that the unbanked rate is higher among households with lower incomes. This is likely due to the fact that these households may not have access to traditional banking services or may be more likely to use alternative financial services.

The unbanked population is made up of people who don't have a traditional bank account. This can be due to a lack of trust in banks, a history of being charged high fees, or simply not knowing how to open an account.

Many people in the US are unbanked because they rely on alternative financial services like check cashing stores and payday lenders. These services often charge exorbitant fees for basic banking services like depositing a check or getting a loan.

Some individuals are unbanked because they don't have a stable income or a steady address, making it difficult to open a bank account. This can be a vicious cycle, as not having a bank account makes it harder to get a job or access credit.

According to the FDIC, about 8.4 million households in the US are unbanked, with a higher percentage of unbanked households found in low-income communities. This is likely due to a lack of access to traditional banking services in these areas.

If you're struggling to access traditional banking services, don't worry, there are alternatives. Prepaid debit cards, like the Green Dot Card, Netspend card, and the Walmart MoneyCard, can be a common solution for those who can't get traditional bank accounts.

According to the Board of Governors of the Federal Reserve System, some households may rely on prepaid debit cards due to limited access to traditional banking services. You can also consider credit unions, which are an alternative to traditional banks that may be easier to access locally. Many credit unions now allow anyone to apply for membership online.

Credit unions are owned by their members, not shareholders, and are nonprofits, which can often allow them to offer highly competitive rates on accounts and loans.

Prepaid Debit Cards are a common way to make online or other cashless purchases for those who can’t get traditional bank accounts. Popular options include the Green Dot Card, Netspend card, and the Walmart MoneyCard.

If you're considering a prepaid debit card, be aware that they often come with fees that can add up quickly. According to the Board of Governors of the Federal Reserve System, many prepaid debit cards charge fees for things like ATM withdrawals and balance inquiries.

Some prepaid debit cards offer more services than others, but they generally don't provide the same level of protection as a traditional bank account. The Consumer Financial Protection Bureau notes that prepaid cards are not subject to the same consumer protection laws as traditional bank accounts.

Here are some popular prepaid debit card options:

Secured credit cards are a great option for people who are struggling to get a regular credit card due to bad or limited credit. They're generally easy to get approved for.

You'll need to make a refundable security deposit to serve as your credit limit, which prevents you from overspending. This deposit is refundable, so you get it back when you close the account.

Secured credit cards often have low annual fees and small minimum deposits. Some even offer rewards for everyday spending, just like regular credit cards.

These cards are perfect for building credit and transitioning from being unbanked to banked. Once you've used the card responsibly and built your credit, you may qualify for an unsecured credit card.

Credit unions are an alternative to traditional banks that may be easier for you to access locally. They're often associated with your employer, worker's union, church, or town, making it a convenient option for many people.

Your employer, worker's union, church, or town might have a credit union that you can qualify to participate in. This is a great way to access banking services without having to go far.

Unlike banks, credit unions are owned by their members, not shareholders. This unique ownership structure can lead to more personalized service and better rates.

They're also nonprofits, which can often allow them to offer highly competitive rates on accounts and loans. This is one of the main reasons people choose credit unions over traditional banks.

Many credit unions now allow anyone to apply for membership online, though you may need to pay a donation or an annual fee if you don’t qualify for traditional membership.

Some state and federal programs aim to help the unbanked gain access to banking services and financial literacy. One such initiative is the Bank on California Initiative, launched by former California Gov. Arnold Schwarzenegger.

The FDIC's Money Smart program is another example of an initiative aimed at helping the unbanked gain access to financial services. This program provides financial education and resources to individuals who are underserved by the traditional banking system.

The U.S. Treasury Department's Section 326 regulations allow banks and credit unions to accept identification issued by foreign governments. This helps undocumented immigrants become banked.

The Treasury Department also makes federal payments to unbanked federal benefits recipients using a Mastercard prepaid debit card.

The unbanked often struggle with overdraft fees, which can cause them to close their accounts or avoid opening new ones. According to the Pew Center on the States, about one-third of overdraft users close their accounts due to high fees.

Overdraft fees can have long-term consequences, such as involuntary closure of checking accounts. This means that banks can close an account without the customer's consent, making it harder for them to access basic financial services.

Banks use data from ChexSystems to assess the riskiness of a customer and decide whether to close or deny a checking account. Virtually every large US bank uses ChexSystems data, which can lead to a customer's being reported and having trouble opening a new account.

Involuntary account closures are more frequent in areas with lower education levels, lower wealth levels, and higher unemployment rates. This can create a vicious cycle for those who are already struggling financially.

The way banks use ChexSystems data can also impact the availability of financial services in certain communities. For example, counties with more competitive banking markets and more multimarket banks experience higher closure rates compared to counties with less banking competition and a higher presence of local banks.

Access to banking services is a major challenge for the unbanked, with over 1.7 billion adults worldwide lacking access to a formal bank account.

In the United States, 8.4 million households are unbanked, meaning they have no bank account or rely on alternative financial services.

Many unbanked individuals lack identification documents, a requirement for opening a bank account in the United States.

The lack of access to banking services can lead to a cycle of financial exclusion, making it difficult for individuals to save money, access credit, or participate in the formal economy.

The unbanked often rely on alternative financial services, such as check cashing services, which can charge high fees and interest rates.

Almost 6 million households in the US are considered unbanked, meaning they don't have a bank account. This number is likely higher due to the survey method used, which misses people without a permanent address.

The FDIC estimates that over 15 million people live in households with no connection to banks, and 48 million more live in homes with only a tenuous connection to banks. This can make it difficult for them to access basic services like stores, restaurants, and medical providers that don't accept cash.

The rate of unbanked households varies greatly from state to state, with Mississippi having the highest rate at 11.1% and Utah having the lowest at 1.2%.

Being in America can be challenging, especially when it comes to accessing basic financial services. Almost 6 million people live in homes with no connection to banks, and 48 million more live in homes with only a tenuous connection to banks. This means roughly one out of every five people in the U.S. has little or no connection to banks or other financial institutions.

The FDIC defines people without a bank account as "unbanked", while those with a bank account but relying on alternative services are called "underbanked." The FDIC data shows that over 15 million people live in a home with no connection to banks, and 48 million more in homes with only a tenuous connection to banks.

The true number of unbanked people is likely higher than the FDIC estimates, as it misses homeless people, transients without a permanent address, and undocumented immigrants. These individuals are likely unbanked because they need a verified address and a government-issued tax-identification number to get a bank account.

Mississippi has the highest rate of unbanked households, at 11.1%, while Utah has the lowest rate, at 1.2%. The rate of unbanked households varies greatly from one state to the next, with the South having the highest rate at 4.9%.

Here are the rates of unbanked households in different regions:

Being unbanked can be a problem because alternative financial services, such as cash-checking services and payday loans, are much more costly. Without a bank account, people don't generate the data they need to establish creditworthiness, making it harder to access credit when needed.

In the United States, the percentage of unbanked residents varies greatly from state to state. Some states have a surprisingly low percentage of unbanked residents.

The state with the lowest percentage of unbanked residents is New Hampshire, with a mere 0.5%. This is significantly lower than the national average of 5.4%. It's likely that New Hampshire's residents have easy access to banking services, making it unnecessary for many to go unbanked.

Utah also has a very low percentage of unbanked residents, at 0.8%. This suggests that Utah's residents have good access to banking services, making it easier for them to participate in the financial system.

On the other hand, some states have a much higher percentage of unbanked residents. Louisiana has the highest percentage, at 11.4%, followed closely by Mississippi at 12.8%. These states have a higher percentage of residents who are unbanked, which can make it more difficult for them to access basic financial services.

Here's a breakdown of the top 5 states with the highest percentage of unbanked residents:

These states have a significant number of residents who are unbanked, which can make it more difficult for them to access basic financial services.