FDIC: Black Households Don’t Use Banks Regularly - Black Enterprise
Black Enterprise Magazine September/October 2018 Issue

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NEWS_FDICMinorities and low-income households are less likely to have a bank account or more likely to use alternative financial services compared to the population as a whole, according a new report by the Federal Deposit Insurance Corp.

Nationally, nearly 20% of lower-income U.S. households — almost 7 million households that earn below $30,000 per year — do not currently have a bank account, reports the FDIC.

The report found that 21.7% of black households are unbanked, compared with 3.3% of white households, and about 31.6% of households are underbanked, compared with 14.9% of whites. The report also found that among the four Census regions, the percentage of unbanked households in the South (9.5%) exceeds the national percentage of 7.7%. Unbanked and underbanked households are those where no one currently has a bank account or where a checking or savings account is open, but alternative financial services are relied on instead, according to the 2009 FDIC “National Survey of Unbanked and Underbanked Households,” which is a special supplement to the U.S. Census Bureau’s Current Population Survey (CPS).

Unbanked or underbanked households are more likely to use AFS like nonbank money orders, nonbank check cashing services, payday loans, rent-to-own agreements, refund anticipation loans (RALs) or pawn shops, and rely heavily on cash transactions, according to the report.

Although these instruments are useful to low-income communities, FDIC banks are more conducive to long-term wealth building and obtaining other banking products such as a credit card, a mortgage, or a car loan, says Leslie Parrish, senior researcher at the Center for Responsible Lending (CRL).

“Being part of the financial mainstream is the first step on a longer path toward savings and asset accumulation, which is really what gets people ahead–being able save and pass it down to future generations,” Parrish says. “If you don’t have a savings account or a basic checking account, you never get to those other steps.

In addition, being under the umbrella of the FDIC means that your savings and your financial services are protected by the U.S. government, says Deborah C. Wright, CEO of Carver Federal Savings Bank (No. 1 on Black Enterprise’s BE Banks list with $789.9 million in assets), and a member of the FDIC advisory committee on economic inclusion, which commissioned the report to increase access to mainstream banking systems.

“The core concern is the cost of financial services [outside of the] banking environment as well as the risk of fraud because … the FDIC does not regulate check cashers and payday lenders,” Wright says.

Thc CRL reports that some alternative financial services, such as payday loans have been known to charge customers excessive interest rates and fees. However, Wright mentions that overdraft fees, which are quite punitive for poor people, are also an issue of concern in the mainstream banking sector.

More than 30% of those previously banked closed their account because of the costs (i.e., minimum balance requirement, service charges, and overdraft fees) of maintaining it, states the report.

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Marcia Wade Talbert

Marcia is a multimedia content producer focusing on technology at Black Enterprise Magazine. In this capacity she writes and assigns stories to educate readers about social media; digital integration; gadgets, apps, and software for business and professional development; minority tech startups; and careers in STEM (Science, Technology, Engineering, and Mathematics). In 2012, she received two Salute to Excellence Awards from the National Association of Black Journalists and was recognized by Blacks in Technology (BiT) as one of the Top 10 Black achievers in the tech arena for 2011 at SXSW in Austin, Texas. She has spoken about technology on panels for New York Social Media Week, at The 2012 Rainbow/PUSH Wall Street Summit, as well as at Black Enterprise’s Entrepreneurs Conference and Women of Power Summit. In 2011, SocialWayne.com chose her as one of 28 People of Color Impacting the Social Web, and through crowdsourcing she was listed as one of BlackWeb2.0's/HP's 50 Most Notable African American Tastemakers in Social Media and Technology for 2010. Since taking on the role of Tech editor in September 2010, she has conceived and produced five cover stories on Technology and/or STEM and countless articles, videos, and slideshows online. Before joining BlackEnterprise.com as an interactive general assignment reporter in 2008, she freelanced with Black Enterprise beginning in 2003 while working as the technical editor at Prepared Foods magazine. There she further honed her writing skills and became an authority on food ingredients, including ingredients used in food fortification and enrichment. Meanwhile, her freelancing with Black Enterprise and BlackEnterprise.com helped her stay current on issues pertaining to the financial and business welfare of African Americans. As a general reporter for Black Enterprise she attended and reported on the Democratic and Republican National Conventions, where she interviewed Valerie Jarrett, senior advisor and assistant to President Barack Obama and U.S. Attorney General Eric Holder. Marcia has a Bachelor of Science degree in Agriculture with an emphasis in food science from the University of Minnesota, and a Master of Science degree in journalism from Roosevelt University in Chicago. En route to her secondary degree, she served as the editor-in-chief of the Roosevelt University Torch, a weekly, student-run newspaper. An avid photographer and videographer, Marcia is one of several employees at BLACK ENTERPRISE who interned for the publishing company as a college student. She lives in New Jersey with her husband, a food scientist; her seventeen-month-old daughter; and “The Cat”, but still considers Chicago home.

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