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Bank accounts feel out of reach to more Americans

October 15, 2012

| Money Rates Columnist

If you can't imagine paying the bills without a bank, you may be surprised to learn 10 million households representing 17 million adults make do without savings accounts or checking accounts, according to a new government report.

The 2011 FDIC National Survey of Unbanked and Underbanked Households, released last month, finds a slight increase in the number of those going without a traditional bank account. According to the survey findings, 8.2 percent of households are unbanked while another 20 percent are underbanked.

Tracking banking habits

The 2011 survey is the second one conducted by the Federal Deposit Insurance Corporation, the first being conducted in 2009. Since that time, the number of unbanked households has increased 0.6 percent while the number of those who are underbanked rose nearly 2 percent.

For purposes of the survey, the FDIC defines unbanked and underbanked households using the following criteria:

  • Unbanked: Households which do not have any type of deposit account at an insured financial institution.
  • Underbanked: Households which have a deposit account but also rely on alternative financial service providers such as a non-bank check-cashing or payday loans.

Of all households, 29.3 percent do not have savings accounts and 10 percent do not have checking accounts. Meanwhile, one in four households have used an alternative financial service in the past year, with 40 percent of unbanked and underbanked households using these services in the past 30 days at the time of the survey.

Groups most likely to skip bank accounts

In addition to looking at the overall rate of unbanked and underbanked households, the FDIC identified several demographic groups that were more likely to skip the use of savings accounts and checking accounts.

Less than 50 percent of these groups report being fully banked:

  • African-Americans: 21.4 percent unbanked and 33.9 percent underbanked
  • Households experiencing unemployment: 22.5 percent unbanked and 28 percent underbanked
  • Households with incomes less than $15,000: 28.2 percent unbanked and 21.6 percent underbanked
  • Unmarried female family households: 19.1 percent unbanked and 29.5 percent underbanked
  • Hispanics: 20.1 percent unbanked and 28.6 percent underbanked

Instead of traditional bank accounts, these household tend to view alternative financial services including non-bank check-cashing and money orders as more convenient. In addition, credit products such as payday loans, refund anticipation loans and rent-to-own services are considered easier to obtain than financial products offered by banks, credit unions and other insured institutions.

Finally, the FDIC discovered the use of prepaid cards had increased 5.6 percent among unbanked households from 2009 to 2011. Last year, 17.8 percent of the unbanked used these cards, compared to 10 percent of the overall population.

In concluding its report, the FDIC suggests its findings could be valuable for policyholders and financial institutions as they work to improve access to banking services for currently underserved populations.

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