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Some reasons a person might not have a bank account include:
- Lack of access via a nearby bank branch or mobile phone
- Minimum balance fees
- Distrust of the banking system
- No access to government-issued ID, which is required to open a bank account
The unbanked in the United States
The unbanked are described by the Federal Deposit Insurance Corporation (FDIC) as those adults without an account at a bank or other financial institution and are considered to be outside the mainstream for one reason or another. The Federal Reserve estimated there are 55 million unbanked or underbanked adult Americans in 2018, which account for 22 percent of U.S. households.
One report found the nationwide rates to be 7.7% unbanked and 17.9% underbanked, with the most unbanked state Mississippi, at 16.4%. Places where over 20% of residents have no bank accounts include Miami, Florida; Detroit, Michigan; Laredo, Texas; Newark, New Jersey; Hialeah, Florida; Hidalgo County, Texas; The Bronx; and Cameron County, Texas. Many counties with fewer than 100,000 residents had even higher rates, including Starr County, Texas, at 32.7%. Some census tracts in Savannah, Georgia; Cleveland, Ohio; Nashville, Tennessee; and Atlanta, Georgia had over 40% unbanked residents.
The majority of the unbanked and underbanked are American-born while a growing number are immigrants where the two groups have low income as a commonality and lack the minimum balance to open checking and savings accounts. According to Congressman Hinojosa, half of the unbanked had a bank account previously but are choosing to not have an account and opting to using the services of check cashers and payday lenders instead. Research has shown that immigrants who have experienced a banking crisis in their countries of origin are significantly less likely to have bank accounts in the U.S., and researchers also found that lower rates of financial market participation tend to persist even for immigrants who have lived in the U.S. for several years. Attributes that contribute to these decisions, however, vary for each racial/ethnic group.
Governor Arnold Schwarzenegger started the Bank on California initiative to help the unbanked in 2008. Previously, in 2001, a financial education curriculum called Money Smart was launched by the FDIC to help the financially unsavvy.
Prior to becoming the FDIC chair in 2006, Sheila Bair ran a research project at for the Inter-American Development Bank at the University of Massachusetts Amherst to discover ways to help unbanked Latin American immigrants use the U.S. banking system. She found that the primary reason recent Latino immigrants often do not use banks to remit money is because they are undocumented. Around the same time, the Treasury Department put in place Section 326 regulations that allow banks and credit unions to accept identification from foreign governments at their own discretion. Banks like Mitchell Bank in Milwaukee have taken up the Treasury Department on their relaxing of identification standards. They have even "offered pamphlets on how to apply for a Wisconsin state ID and driver's license, and invited the Mexican consulate in Chicago to visit with a mobile unit that issues 'matricula' cards". In Chicago, the Consul General of Mexico, Carlos Sada, estimated that up to 25% of applicants of the Matricula Consular ID apply in order use it to acquire U.S. bank accounts.
Federal benefits for unbanked
A U.S. federal law signed in 1996 contained a provision that required the federal government to make electronic payments by 1999. As a part of implementation of the provision, in 2008 the U.S. Treasury Department paired with Comerica Bank to offer the Direct Express Debit MasterCard prepaid debit card. The card is used to make payments to federal benefit recipients who do not have a bank account.
- Holder, Sarah (2019-06-04). "Why Cleveland Wants to Bring Back Postal Banking". CITYLAB. The Atlantic Monthly Group. Retrieved 2019-06-05.
- Corporation for Enterprise Development. "The Most Unbanked Places in America" (PDF). Retrieved 2016-09-10.
- Hamilton, Anita (August 16, 2007). "Profiting from the Unbanked". TIME.
- Federal Reserve Bank of Chicago, Bank Crises and Investor Confidence, November 2008
- "Immigrant-Native Differences in Financial Market Participation", Federal Reserve Bank of Chicago, December 2006
- Federal Reserve Bank of Chicago, The Importance of Check-Cashing Businesses to the Unbanked: Racial/Ethnic Differences, August 2003
- "Money Smart - A Financial Education Program". Federal Deposit Insurance Corporation (FDIC). Retrieved 2009-02-21.
- "Hearings before the Subcommittee on Financial Institutions and Consumer Credit "Serving the Underserved: Initiatives to Broaden Access to the Financial Mainstream"" (PDF). The United States House of Representatives. June 26, 2003.
- Jordan, Miriam (July 11, 2005). "Banks Open Doors To Illegal Immigrants". Wall Street Journal. Archived from the original on February 16, 2008.
- "Statement of Sheila Bair Dean's Professor of Financial Regulatory Policy University of Massachusetts Amherst Before the Congressional Hispanic Caucus Hearings on Matricula Consular" (PDF). Asociacion de Supervisores Bancarios de las Americas (ASBA). March 26, 2003. Archived from the original (PDF) on August 12, 2007.
- “Federal government chooses direct deposit and prepaid cards over mailing checks” Archived 2013-04-23 at the Wayback Machine, BankCreditNews, 15 Apr 2013, Accessed 22 Apr 2013
- Choe, Christopher (2009). "Bringing in the Unbanked off the Fringe: The Bank on San Francisco Model and the Need for Public and Private Partnership" (PDF). Seattle Journal for Social Justice. 8 (1).
- World Bank Global Financial Inclusion Database: Measures how people in 148 countries - including the poor, women, and rural residents - save, borrow, make payments and manage risk
- More Americans Choosing the Unbanked Life According to National Survey (2012)
- 2017 FDIC National Survey of Unbanked and Underbanked Households with links to previous surveys