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Study: Working poor avoiding banks

October 26, 2011

| Money Rates Columnist

Between their complicated disclosure statements and increased fees for checking accounts, credit cards and debit cards, banks aren't exactly synonymous with word "benevolent" these days.

But a Pew Health Group study, which surveyed 2,000 low-income Los Angeles households, contends that banks would be doing society and themselves a favor if they would just take some simple steps to better serve the working poor.

According to Pew, 17 million Americans don't have any type of bank account. In many cases, the survey found, low-income bank customers are scared off by steep bank fees, a lack of proper identification and minimum deposits that are outside their reach. As a result, these workers are forced to do business with less regulated operations and consequently face higher fees, increased fraud and fewer ways to save responsibly.

The study also indicates the problem is growing. The percentage of families without a checking account or savings account increased by 13 percent last year while the number of families opening new accounts grew only 8 percent.

The study also found that families who are able to open and maintain checking accounts are better able to save money and pay their bills. More than 90 percent of the working poor surveyed by Pew said they keep a surplus of cash in their bank account, and nearly 90 percent have one or more savings accounts.

By contrast, one in five of those without an account have suffered some kind of cash loss, including theft. They're also unable to take advantage of the convenience of bank branches or in-network ATM machines that could save them fees on check cashing and withdrawals.

Pew suggests that banks can help these people -– and increase their business in the process -– by simplifying their fee structure, ending delays in posting deposits and employing "neutral and objective" transaction sequences that don't maximize overdraft fees. Pew also recommends increasing the availability of ATMs in low-income areas and encouraging new low-income customers by also offering money orders, check cashing, personal loans and bill-pay services.

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