About 8 percent of America’s 115 million households are carrying on their lives without a checking or savings account because of the high costs and fees charged by banks or because they simply don't trust the nation's financial system.
The figures are even higher for minorities, with roughly 20 percent of African-Americans and Hispanics living outside the banking system, according to census data compiled by the FDIC and reported by NBC News
The biggest problem is that many U.S. households are just too broke to utilize the services banks offer. Overdraft or bounced check fees can add up for people who have difficulty maintaining minimum balances or whose incomes vary from paycheck to paycheck. And interest rates on savings accounts hover around zero percent, so many don't see the value to begin with of putting their money in banks.
“Instead of making money, I would have to pay fees,” said Sabino Fuentes-Sanchez, who didn’t have a bank account for years. “[So] we used to keep money in the house. We were always trying to look for ways to hide the money in the house to keep it safe.” At one time he had $25,000 hidden in different places.
According to an NBC News report, 56 percent of people who live outside the banking system earn less than $15,000 a year. And because they live what amounts to cash-only lives, they end up being penalized even more because they have little money.
Banks typically charge them $6 to cash a check, for example, and if they need extra money for emergencies they usually get it in the form of payday loans, which can come with triple-digit interest rates attached. And for many, it's also nearly impossible to save when living a cash-only life.
“Cash in hand is cash spent, my mother always said,” said Kim James, who was homeless for most of the last 10 years because, in part, she had no place to save money.
In response to the problem, a number of financial companies called Community Development Financial Institutions (CDFIs) are now springing up to help persuade those without bank accounts to open them.
“You make sure people are getting products and services they need,” said Mark Pinsky, CEO of the Opportunity Finance Network, which helps fund CDFIs. “Banks may be the best place, they may not, but we don’t want to just leave them vulnerable to the predators out there.”
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