NerdWallet: This is how much being ‘unbanked’ is costing 5.9 million Americans

by | May 24, 2023 | Stock Market

This article is reprinted by permission from NerdWallet.  American households without bank accounts could be spending $230 million a year for just three financial services they use outside the banking system. But not all “unbanked” households are ready to open accounts.

Just 4.5% of American households — roughly 5.9 million of them — operate without an account at a bank or credit union, according to a 2021 survey from the Federal Deposit Insurance Corp., a number that has fallen from 6.5% in 2017. Going without a bank account can be costly because you’re forced to navigate paying for financial services such as cashing your paycheck. But getting a bank account can also have financial barriers to entry — you may need a minimum opening balance or to maintain a minimum balance to get monthly fees waived. In addition, people with an irregular income or who live paycheck to paycheck, who may be more likely to overdraw their accounts, may face hefty overdraft fees. When asked their reasons for not having an account, 40% of unbanked households say not being able to meet minimum balances keeps them away; 30% say fees are too high. But being unbanked isn’t only a financial decision. Privacy concerns (cited by 34%) and distrust of banks (33%) are also top reasons cited in the FDIC’s National Survey of Unbanked and Underbanked Households, suggesting that opting out of traditional banking is more than just a matter of affordability. Indeed, groups that have historically been marginalized or shut out of the system may be apprehensiv …

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