The un-/under-banked

A few weeks ago we were talking about a certain politician having no bank account. That go me interested in reading about who is un-/under-banked; why are they un-/under-banked; what are the costs or benefits of being un-/under-banked? Here are some articles on the topic that I found interesting.

Looking at the who and the costs part of my questions this September, 2023, article provides some statistics.

Although only 16% of Americans are “underbanked,” today 27% of Blacks are underbanked, which means that they might have savings or checking accounts, but typically depend on alternative financial services like payday lenders, rent-to-own services, and check-cashing businesses. Additionally, some Black Americans still do not have direct deposit, which is often key to getting free checking accounts. Their lack of access to banks forces them to participate in a range of financially risky behaviors that make it more difficult to close the financial and wealth gaps between minority groups and Whites.

The article also goes on to examine the why POC are un-/under-banked.

The reasons are numerous: They’ve seen banks disappear from Black communities. Banks have unfairly denied them home and business loans. Some have witnessed firsthand the abuse, theft, and corruption by the government and private sector. The majority of unbanked adults are low-income and lesser-educated, and they are more likely to come from single-parent homes. Fundamentally, the main reason why “unbanked” Americans do not use banks is because they cannot afford financial services – especially banking fees – associated with bank accounts.

Next it looks at the costs of being un-/under-banked.

These groups incur high fees for routine financial transactions like cashing paychecks, often paying for money orders and stamps at post offices just to pay bills. Some face steep fees even when they reduce check-cashing costs by using prepaid cards. Others became reliant on predatory lenders, such as payday lenders charging fees of nearly 400%, or car title loans with annual percentage rates of about 300%. In Tennessee, these lenders have become increasingly powerful in the last two decades, targeting “the working poor and young people, often in Black and Hispanic communities, because statistically, these demographics lack connections to traditional banking.” They usually have little leeway when emergencies sprout up. These Americans struggle to come up with a few thousand dollars to repair a car, fix the home heating unit, or deal with a medical issue.

The article concludes with steps that need to be taken to change the situation.

A 2019, article looked at a credit union’s attempt to make an impact on this issue. There are some different numbers for the un-/under-banked population. It also mentions echoes the causes in more blunt terms.

More than half of unbanked households cited not having enough money to keep in an account, 30 percent said they don’t trust banks and 9 percent reported banks are in an inconvenient location, according to the survey.

There were two Nerdwallet articles that looked at being un-/under-banked. Both articles look at the costs of this.
The 2016, article looked at the costs to on an individual.

The 2023, article looked at the costs to the affected groups and the economy as a whole.

A 2019, article looked at the benefits the un-/under-banked are missing by their status.

A 2023, article looks at 6 common reasons people choose the be un-/under-banked and addresses why each one is economically unsound. The article does not address cultural and historical reasons for these choices.

Finally a 2022, article in Forbes brings up the idea of having the Postal Service open a banking service as is done in some countries almost as an afterthought.

One proposed solution is to have the United States Postal Service partner with banks to provide nonbank financial services to the underserved. This suggestion rests on the fact that there are already post offices in every neighborhood, and that the Postal Service is a well-trusted institution. Since the Postal Service already offers money orders and international money transfers, it’s well positioned for an expansion in financial services.

That said, not everyone believes this is a viable solution, and we are nowhere near making such a change to the U.S. Postal Service a reality.

Without such a change at the federal level, the unbanked and underbanked will continue to be served by a patchwork of alternative financial services and a few banks geared toward the newly banked—all while continuing to pay the price of living without full bank access.


I have volunteered with AARP Tax Aide for the past 5 years. One of the most interesting parts of this volunteer work is hearing about the lives of the clients, who are mostly elderly and/ or working class.

One client was a tall, strong African-American man in his late 40s. He had W-2 forms from 3 different Goodwill stores in different states. He had worked his way cross–country from Georgia to Washington State. This single man with no dependents qualified for an Earned Income Tax credit of $600, a substantial amount for a minimum-wage worker. (The most fun part of the job is getting working people the EITC which is like manna from heaven and usually a happy surprise to them.)

I asked him if he wanted direct deposit into his savings account. He was unbanked with no savings account. He told me he lived hand-to-mouth and had no savings. He lived in motels with no fixed address. He asked me to have the check mailed to his ex-wife in Georgia.

This man was strong and self-sufficient but vulnerable to any reversals of fate. Millions live in this way.