1 in 10 in Ohio without checking, savings accounts
Posted September 21, 2012 in Press Releases
Almost one in 10 households in Ohio do not have a checking or savings account, and consumers are increasingly relying on some fee-heavy alternative financial services, according to a new federal study and interviews with experts.
More U.S. consumers are shunning banks and other insured depositories, and these people are more likely to use pawn loans, check-cashing services, rent-to-own stores and non-bank money orders and remittances, according to a survey released this month by the Federal Deposit Insurance Corp. Even people who participate in the standard banking system are more regularly using non-traditional financial services, including payday loans.
Some of the alternative products being used have high interest rates and fees, and critics say they do not allow consumers to save and build credit.
“Obviously, going completely unbanked is a real bad option, because it is more expensive all around, and you pay more for everything,” said David Rothstein, project director for asset building with Policy Matters Ohio.
About 414,000 of Ohio’s 4.72 million households did not have a checking or savings account last year, and about 9.9 million households nationwide were also “unbanked,” according to the FDIC survey. Additionally, about 912,000 households in the state were “underbanked,” meaning they had bank accounts, but still used alternative financial services that typically come with high fees. Across the country, about 51 million adults and 16.6 million children live in households that are underbanked.
Unbanked, in the report, meant people using neither a bank nor a credit union. The number of unbanked households in the United States grew by 800,000 between 2009 and 2011, and the majority of these consumers said they do not have enough money for an account, or they did not need or were not interested in maintaining one, according to the survey. Other reasons cited in the survey for not using banks included an inability to open an account because of financial history, a distrust or dislike of banks, and dissatisfaction with banking fees.
About 60 percent of residents of households without bank accounts are unemployed or not in the labor force, and more than eight in 10 unbanked households have annual incomes below $30,000, according to the study. Three-fourths of unbanked households do not have education beyond a high school degree, and most unbanked consumers are under the age of 45. About two-thirds of U.S. households without bank accounts are black or Hispanic.
Many Americans do not have savings and live paycheck to paycheck, and the traditional banking sector does do not meet their real-world financial needs needs, said Ken Rees, CEO of Think Finance, a Texas-based company that offers financial products for underbanked consumers.
“They need their money quickly, they want convenient access