There’s no line at the bank, but the check-cashing kiosk is standing room only.
That’s where millions of Americans are going. They have no bank account, or have limited banking relationships, and their numbers are rising, according to a federal agency.
Some 10 million Americans, or 8.2 percent of US households, are classified as unbanked, according to a Federal Deposit Insurance Corp. (FDIC) survey. That’s some 821,000 households, FDIC officials said. And that’s up almost 1 percent from the previous survey.
“Unbanked” means that no one in the household has a checking or savings account. Such people often depend on what FDIC officials call alternative financial services (AFS), which include check-cashing shops and prepaid debit cards.
Nearly 30 percent of households do not have a savings account, while almost 10 percent don’t have a checking account.
In addition, some 20.1 percent of Americans, or one in five households, are underbanked, the survey said.
“Underbanked” means a person may have a checking or savings account, but he or she has used an AFS in the last year; these also include payday loans, pawnshops, refund-anticipation notes and non-bank money orders.
Almost all of these products have been criticized by consumer advocates as inefficient ways of accessing credit and banking.
Yet the number of the underbanked is also rising. It grew by 2 percent since the last survey, which is taken every two years, said the FDIC, which is charged with ensuring that all Americans have access to safe, secure and affordable banking services.
Where does one find the greatest rates of those with few or no banking relationships?
The survey said they “are found among non-Asian minorities, lower-income households, younger households and unemployed households.”
“The No. 1 reason why they don’t have an account is they say they don’t have enough money,” says Keith Ernst, associate director of depositor and consumer protection at the FDIC.
Most of the unbanked told FDIC officials that they believe they can do without a bank.
“Unbanked and underbanked households value the convenience of alternative transactions and perceive AFS credit to be easier to obtain than bank credit,” according to the survey. These households, FDIC officials said, often use prepaid debit cards.
“Some people feel challenged by having a checking account,” added Nessa Feddis, senior counsel and vice president with the American Bankers Association. She added that bankers are coming up with prepaid credit and debit cards to serve this segment.
Feddis also cautioned that the survey might be misclassifying some Americans as underbanked who merely want to use AFS products from time to time.
The information gathered in the FDIC survey is being used to help banks come up with products that will bring the unbanked and underbanked into the banking system, according to Ernst. “We want to identify the opportunities for banks in helping to meet the needs of these households,” he said.
To help achieve this goal, Ernst said, several banks are working on new products. He pointed to the KeyBank Access Account.
This is a recently introduced account that is designed to meet the needs of the underbanked/underserved, according to Dave Bowen, a senior vice president of products with KeyBank.
The account has debit-card access, as well as online banking and bill-paying features. A $5 monthly fee is waived if two or more transactions are made or if there is $200 or more in deposits.
Some 45,000 households were surveyed for the study, which was conducted by the FDIC in partnership with the Census Bureau.
No pen, no teller
More than 28 percent of American households are conducting checking and savings transactions outside the mainstream banking system
10M or 8.2% of adult Americans do not have a bank account
35M or 29% of American households have no savings account
25% of US households have used alternatives to banks this year