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- Communities without banks encounter substantial obstacles when trying to access financial services.
- Approximately 5.9 million Americans lacked a bank account in 2021.
- The primary cause of not having a bank account often stems from an inability to maintain the required minimum balances.
Opening a bank account can be crucial for managing personal finances effectively.
It not only offers a safe space for storing and managing your funds but also provides an opportunity to establish a banking connection with a financial institution. This relationship can assist you in accessing various financial products such as personal loans. a credit card .
Who are the unbanked?
The term "unbanked" pertains to individuals who do not utilize or have access to a checking account. savings account to manage their money.
Based on an FDIC study In 2021, approximately 5.9 million individuals from about 4.5% of U.S. households—were without bank accounts. Despite being high, this figure represents the smallest percentage recorded since tracking started in 2009.
Moreover, the rate of those without bank accounts was more elevated among low-income families, households with limited education, African American families, Hispanic families, working-age households containing a member with a disability, and homes headed by single mothers.
Reasons for being unbanked
As per the FDIC study, the primary reasons why households without bank accounts gave for being unbanked were:
- Insufficient funds to satisfy the minimum balance requirement (mentioned by 21.7% of participants).
- Mistrusting of banks (mentioned by 13.2% of participants)
- Concerns about privacy (raised by 8.4% of participants)
Solutions and alternatives
Various federal, state, and private initiatives strive to help those without bank accounts obtain accessible and cost-effective financial services.
David Rothstein, who serves as a senior principal at the firm, Cities for Financial Empowerment Fund And as a leader of the Bank On Initiative, they mention that unbanked households can use Bank On as a resource to locate an accessible and secure financial institution that suits their needs.
The Bank On Initiative presently boasts 376 certified banking accounts across the U.S. Options can be found here. every state .
All of these accounts will satisfy the Bank On requirements. They will have monthly fees of $5 or less. overdraft "NSF fees come into play with a minimum initial deposit of $25 or lower," according to Rothstein.
Bank On also has local coalitions they collaborate with various organizations to assist people in finding the most suitable bank account for their individual requirements.
The FDIC similarly acknowledges financial institutions controlled by Black, Hispanic American, Asian, and Native Americans that cater to their respective communities as well. Minority Depository Institutions Program .
Quick tip: Check out our guidelines on Black-owned banks and Hispanic American-owned banks To find out more details regarding the particular services and items provided.
The significance of including finances for all
According to the survey conducted by the FDIC, one-third of those polled mentioned a lack of trust in financial institutions as one cause for not having a bank account. Additionally, 13.2% stated this mistrust was their primary reason for being unbanked.
Nicole Elam, who serves as both the president and CEO of the National Bankers Association, recognizes that Black and Hispanic families encounter more difficulties compared to white families. when receiving home loans and other financial services.
Considering the history of Black and brown communities, they've often faced systematic exclusion," explains Elam. "It’s not surprising that this might lead to distrust towards various institutions.
Consequently, these communities ought to seek out institutions that do not merely promote products and services, but also provide financial education.
As Elam points out, when discussing unbanked and underbanked households, these individuals require financial literacy education that is inclusive, catering to their specific needs. Additionally, they need access to financial services to improve their overall financial wellbeing.
Elam further points out that combining financial literacy with an existing banking connection enables the modification of banking habits within the unbanked population.
Unbanked FAQs
What is the definition of being unbanked?
Individuals without bank accounts lack both savings and. checking account and avoid using banking institutions for their financial transactions.
What causes certain individuals to be without bank accounts?
A lot of individuals lack bank accounts primarily due to their distrust in financial institutions or because they can't maintain the necessary minimum balances.
What are the primary obstacles faced by people without bank accounts?
Individuals without bank accounts might struggle with safeguarding their savings, obtaining credit or loans, and conducting everyday financial activities. They could resort to using pricier alternatives like check-cashing services instead. payday loans .
What methods allow those without bank accounts to obtain financial services?
Outreach initiatives like these community programs include Bank On Initiative and Inclusiv Network assist individuals from underprivileged regions in obtaining accessible and secure banking services through credit unions and financial institutions.
What makes financial inclusion significant?
It is essential for everyone to have access to secure and reliable financial services so they can handle their funds, obtain credit, and make informed financial choices.
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