FDIC Survey Shows Over One Quarter Of U.S. Households Are Unbanked Or Underbanked

According to a survey released by the FIDC, 25.6 percent of all American households (or about 30 million) did not use traditional banking last year. Most of these households are low-income or minority families. According to FDIC Chairwoman Sheila C. Bair, in light of recent economic uncertainty, many households have made the decision to shun conventional banking services. The report also stated that many of these families who don’t use banking would be unable to reach financial security. They also run a high risk of becoming victims of theft.
About 17.9 percent of households, which is about 21 million, are considered underbanked. These individuals use services such as pawnshops or check cashing but also have some type of checking or savings account. They would be people who don’t fully use all the banking services provided to them by the bank where they have their account.
A Closer Analysis
Nationwide, 7.7 percent or 9 million households were shown to have no checking accounts. Furthermore, 41 percent of these families said that they were not likely to open one in the future at all. The report also showed that minority groups were the most likely to not have an established banking relationship.
In terms of ethnicity, about 21 percent of African American households were unbanked (had no accounts and did not use any banking services). In addition to that, 19.3 percent of Latinos and 15.6 percent of Native American households feel into that same category. On the other hand, only 3.3 percent of Whites and about 3.5 percent of Asians did not use any type of banking service.
In the underbanked category, those who may have an account but did not use any services, there were 31.6 percent of African Americans. There were also 28.9 percent of Native Americans and 24 percent of Latinos respectively. In contrast, only 7 .2 percent of Asian households and 14.9 percent of whites fell into this category.
The Impact on Low Income Families
If you look at the income of unbanked and underbanked households, the majority are low-income families. About 75 percent of the families that are unbanked have annual incomes of less than $30,000. This is about one fifth of all the people that fall into that income bracket. Of families that made between $30,000 and $50,000 only 4.2 percent of them had no bank accounts. Less than one percent of these unbanked families made more than $75,000. With interest rates dropping, it makes sense that it is those who do not have enough savings to qualify for the higher yield accounts that decide to simply keep their cash readily available.
One interesting thing to note is that last year; 1.2 million U.S. households closed their bank accounts for various reasons. According to the survey more than 31 percent blamed high minimum balance limits, overdraft fees and service charges. 34 percent of them said they did not have the funds to justify an account. There are also some that have withdrawn their savings with increased fears about banking failures. There is an increasing number of banks on the troubled list, bank failures are expected to peak next year and banks are adding fees to cut losses. With all this happening at once, only time can tell if there will more or less unbanked and underbanked families nationwide in the coming year.

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