We hate to be the bearers of so much bad news today, but here it goes: According to the Federal Deposit Insurance Corporation (FDIC), 21.4 percent of black Americans don’t have bank accounts. That means a portion of the black community is using money orders, prepaid debit cards and other financial services to take care of everyday banking needs. Usually, those services come with fees and high interest rates, which add up fast. A recent report showed a high number of people are using payday loans for things like food and utility bills.
“The high fee rates of payday loans combined with their use for everyday needs transforms the loan into a high-interest credit line that leaves users in debt for months. The average user takes out $375 a year and spends $520 in interest,” we reported.
But the FDIC research also found that 29.5 percent of those who don’t have traditional bank accounts don’t use alternative financial services (AFS) either, indicating that they rely on cash.
“Unbanked and underbanked households value the convenience of transaction AFS and perceive AFS credit to be easier to obtain than bank credit,” the report says.
More than a third of black households — 33.9 percent — have a checking and/or savings account but still use these alternative banking services, falling into the category of “underbanked.”
“The highest unbanked and underbanked rates are found among non-Asian minorities, lower-income households, younger households, and unemployed households,” the FDIC report says.
The research was conducted in partnership with the U.S. Census Bureau and 45,000 houses were polled. Overall, 10 million U.S. households (or 8.2 percent) lack access to traditional banking services. That’s one in 12 households. One in five (24 million households) are underbanked. More than a quarter (29.3 percent) don’t have a savings account, but only 10 percent don’t have a checking account. About two-thirds of all households have both checking and savings accounts.