By Morf Morford, Tacoma Daily Index
With all the news about booming real estate, stocks, cyber-currency and interest rate markets, it’s easy to forget some of us – an estimated 63 million Americans are, in fact, no banked or underbanked.
It’s the term for those who don’t use banks to perform basic financial transactions like cashing checks, saving money, or applying for credit.
The main reason American households did not have a bank account in 2019 was because they were unable to meet and maintain minimum balance requirements.
To put it mildly, not having a bank account is a bit of a hassle.
Buying anything of value with cash is nearly impossible.
Renting is, at best, difficult without a bank account or credit score.
A 2021 Federal Reserve report on the economic well-being of American households found that about 5% of adults in the United States did not have a bank account in 2020, while 13% were underbanked, which meaning they had a bank account but also, for some reason, used a service like a money order or payday loan service.
What’s in your wallet?
On the other hand, 81% of American adults were fully banked, had a bank account, and did not use a service like a money order or check cashing service.
As you might guess, the report showed that unbanked and underbanked rates were higher among those with lower incomes and less education – although 1% of adults who earned $50,000 or more in 2020 were not also unbanked.
The research also showed that unbanked and underbanked rates were higher among blacks (13%) and Latinos (9%) than among whites and Asian Americans (3% each). ).
As you can imagine, education has a lot to do with our banking habits. Regarding education level, the report found that only 37.1% of households without a high school diploma used bank credit, compared to 87.5% of households with a college degree.
If someone you know is having trouble maintaining these minimum balances, there are other options. For example, Ally Bank and Capital One both offer checking and savings accounts with no minimum balance requirement and no maintenance fees.
Credit unions tend to be very flexible with these terms. They require membership, but qualifying as a member sometimes only requires that you live in a certain geographic area.
States with the highest percentages of unbanked individuals in 2019 – 7.6% or more of the local population – included New Mexico, Texas, Oklahoma, Louisiana, Mississippi, Tennessee, ‘Alabama and Connecticut.
Life without a bank account
Many years ago I had a male student who was unbanked.
He had been legally obligated to pay child support.
To avoid paying, he avoided any legal traces of work, income tax, or credit.
To be honest, it was complicated.
He could not rent an apartment in his own name.
To work, everything had to be “under the table” – no Social Security, no unemployment benefits, and to cash a check he had to go to a check cashing service which charged huge fees.
He had to pay – and be paid – only in cash.
As for a variety of government agencies, it literally did not exist.
I don’t know how long he’s been doing this, or if it seemed to work for him, but it certainly seemed like it would have been a lot easier to pay off his arrears – and open a bank account.
In other words, being unbanked is difficult and costly.
In short, banks and credit unions sustain the lives of most of us.
Whether it’s home loans or credit checks, or in many cases employment background checks, we rely on banks and credit unions in more ways than most of us realize. will never notice.
It’s weird when you think about it, but it makes sense; Sometimes the money we can’t see impacts our lives more than the money in our pockets.
Maybe money is more like information – it doesn’t matter so much what we have as what we have access to.