At the beginning of 2009, the Federal Deposit Insurance Corporation (FDIC) initiated an examination of the unbanked and underbanked people of the U.S. as part of Census data collection.

The report was released this week, and shows some worrying trends about financial institution usage, particularly among minority populations.

• Unbanked: This term refers to people who have neither checking nor savings accounts, and who rely primarily on non-bank financial institutions (like check cashing services, payday lenders, refund anticipation loans, etc.) for their financial needs.
• Underbanked: This refers to people who have either a checking or savings account, but rely on alternative financial sources at least once or twice a year.

The Banking Study

According to the executive summary of the report, its goal was to address a gap in reliable data on the number of unbanked and underbanked households in the U.S.

The issue matters because those without bank accounts lose out on access to lower-cost financial management. Bank use can also permit people to build credit histories and establish financial stability – in other words, it’s in the best interest of the U.S. as a whole to improve access to banks for everyone.

Here’s a look at the hard numbers:

• 25.6 percent of American households (about 60 million adults) are unbanked or underbanked.
• A breakdown by race shows that 43.3 percent of Hispanic households, 44.5 percent of American Indian/Alaskan households and nearly 54 percent of black households are unbanked or underbanked.
• At least 71 percent of un- and underbanked households have incomes of $30,000 per year or less.
• The most common reason people offered for not having a bank account was feeling that they did not have enough money to justify one.
• About two thirds of unbanked households use one or more of these financial tools: non-bank money orders & check cashing, payday loans, pawn shops, rent-to-own agreements and refund anticipation loans.
• About one quarter of unbanked households use none of the aforementioned services, which suggests that cash is their go-to commerce tool.

Opening and maintaining bank accounts is an important step toward financial stability for individuals and households. On a larger level, the high numbers of unbanked Americans can be seen as one symptom of our country’s varied economic woes, as little savings can often lead to bankruptcy if debts become unmanageable.

Additional Resources

Full FDIC Report (PDF)

Tags: banking, money habits, saving money