NCPA - National Center for Policy Analysis


December 2, 2009

More than one in four American households, including more than half of black households, use check cashers, payday lenders or pawnbrokers rather than a bank, according to a Federal Deposit Insurance Corporation (FDIC) report to be released today.

Nearly 30 million households have no bank account or have one but also use alternate financial services at least occasionally, according to the FDIC report.  The survey, the FDIC's first in-depth study of the issue, was conducted by the Census Bureau.

The problem is most acute among minorities:

  • Some 53 percent of African-American households and 43 percent of Hispanic households use check cashers or similar services instead of or in addition to banks.
  • Buying money orders and cashing checks are the most frequent transactions, the survey shows.
  • Those using check cashers and other services say they are faster, cheaper and more convenient than banks -- even though they pay a fee to cash a check they could deposit in a bank account for free.

The FDIC wants banks to win back those customers, saying consumers should have the benefit of insured savings and be able to build a credit history.

"There's a substantial segment of American households whose financial services needs aren't being adequately met," Martin Gruenberg, FDIC vice chairman, said in an interview Tuesday.  He called the disproportion of minority households in the group "dramatic and troubling."

Other findings:

  • Sidestepping banks is more common in the South, among single heads-of-households and among people under age 45.
  • About 9 million households -- including 20 percent of families earning less than $30,000 a year -- have no bank account at all.
  • Households that have bank accounts but still use check-cashing services are just as likely to be moderate-income -- earning up to $50,000 a year -- as low-income.

Source: Martha T. Moore, "Report: Many minorities shun banks," USA Today, December 2, 2009.

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