Recent studies have found that when it comes to using cash checking services or other alternative financial services that blacks are unbanked or underbanked at a much higher rate than whites. This news comes via a new report that was released by the Federal Deposit Insurance Corporation (FDIC).
The FDIC is an independent government agency that guarantees bank deposits of up to $250,000 at banks that are FDIC insured. The FDIC began the study that led to the release of the current findings back in the summer of 2013, in conjunction with the United States Census Bureau. This study collected demographic data and financial information from almost 41,000 people across the country.
For this particular survey the FDIC defined households that did not have account at FDIC-insured banks as being unbanked and households that did have bank accounts at insured institutions, but still made use of alternative financial services to do some of their financial activities – cashing checks, getting payday loans – as being underbanked.
Back in 2013 the FDIC estimated that fewer than 10 percent of households in the United States were underbanked. It is important to note, however that the rate of black households that qualified as being unbanked dwarfed the overall national rate. According to this report from the FDIC, 20.5 percent of black households in the U.S. are unbanked, compared to less than 4 percent of white households that did not have bank accounts at FDIC insured financial institutions. And while just 1 percent of households were labeled as “recently unbanked” during the time when the FDIC survey was conducted, black households accounted for almost 50 percent of the households in that particular group.
The FDIC report stated: “Among households that recently became unbanked, 34.1 percent experienced either a significant income loss or a job loss that they said contributed to the household becoming unbanked.” By way of comparison, nearly 20 percent of households that opened a checking or savings account during the time when the poll was taken went on record as saying that new jobs promoted their transitions.
Fewer job prospects may help to explain why blacks – who often deal with unemployment rates that are nearly double that of the national unemployment rate – get by without access to traditional bank accounts. In the Southern region of the United States, the area with the highest concentration of black citizens – the highest rates of unbanked and underbanked households was reported.
The FDIC report explained it like this: “In fact, while 38 percent of U.S. households live in the South, approximately 44 percent of unbanked and underbanked households lived there.” Nearly 60 percent of the people who responded to the FDIC survey said that they went without using FDIC bank accounts because they did not have adequate funds to keep into the account to meet minimum balance requirements, with 34 percent of the responders saying that they did not like or trust traditional banks.
There have been quite a few high profile settlements that involved charges of lending discrimination and misleading investment practices. These cases involved Wells Fargo Bank and Citigroup and were filed hot on the heels of the most recent housing crisis. These types of situations may help to provide some clues as to why many black citizens feel that they cannot get a fair shake from the traditional banking system in this country. Thankfully, though, lots of new alternative financial services are being offered that may help both black and white unbanked citizens to have easier and more affordable access to the financial products and services that they need to get by financially.