Unbanked Explained: What it Means and Why It Matters

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• Unbanked communities face significant barriers to accessing financial services.
• About 5.9 million Americans did not have a bank account as of 2021.
• The most common reason for being unbanked is an inability to meet minimum balance requirements.

Opening a bank account can play an important role in personal finance.

Not only does it provide a secure place to store and manage money, but it gives you a chance to build a banking relationship with a financial institution, which can help you access financial tools like a personal loan or a credit card .

Who are the unbanked?

The term unbanked refers to those who don't use or have access to a checking or savings account to manage their money.

According to a FDIC survey , 4.5% of US households — about 5.9 million people — were unbanked in 2021. While high, that is the lowest share since the survey began in 2009.

Further, the unbanked rate was higher among lower-income households, less-educated households, Black households, Hispanic households, working-age households with a disability, and single-mother households.

Reasons for being unbanked

According to the FDIC survey, the reasons unbanked households cited most frequently for not having a bank account were:

• Not enough money to meet minimum balance requirements (cited by 21.7% of respondents)
• Distrustful of banks (cited by 13.2% of respondents)
• Privacy concerns (cited by 8.4% of respondents)

Solutions and alternatives

A variety of federal, state, and private programs aim to assist unbanked populations with gaining access to affordable banking services.

David Rothstein, senior principal at the Cities for Financial Empowerment Fund and a leader of the Bank On Initiative, says unbanked households can refer to Bank On as a resource to find an affordable and safe financial institution that's right for them.

The Bank On Initiative currently has 376 certified bank accounts throughout the U.S. You can find options in every state .

"Any of those accounts are going to meet the Bank On standards. They are going to be $5 or less per month, no overdraft or NSF fees, a minimum opening deposit of $25 or less," says Rothstein.

Bank On also has local coalitions that work with different groups to help individuals find the best bank account for their unique needs.

The FDIC also recognizes financial institutions owned by Black, Hispanic American, Asian, and Native Americans and serve their respective communities under the Minority Depository Institutions Program .

Quick tip: Look at our guides on Black-owned banks and Hispanic American-owned banks to learn more about specific services and products offered.

The importance of financial inclusion

A full third of respondents surveyed by the FDIC said one reason they didn't have a bank account was a distrust of banks, while 13.2% said it was the main reason.

Nicole Elam, president and chief executive officer of the National Bankers Association, acknowledges that Black and brown households face greater challenges than white households when receiving home loans and other financial services.

"When you think about the history of Black and brown communities, many of them have been systematically excluded," says Elam. "It's understandable why there would be a mistrust of things."

As a result, these communities should look for institutions that aren't just pushing products and services, but also offering financial education.

"When you talk about the unbanked and underbanked households, they need inclusive financial literacy education, so education that meets them where they are, as well as access to financial services to achieve financial health," Elam says.

Elam adds that when you couple financial literacy with an established banking relationship, you're able to change banking behaviors among the unbanked.

Unbanked FAQs

What does it mean to be unbanked?

Unbanked individuals do not have a savings or. checking account and do not use banking institutions for their financial transactions.

Why are some people unbanked?

Many people are unbanked because they do not trust financial institutions or do not have the funds to meet minimum balance requirements.

What are the main challenges for unbanked individuals?

Unbanked individuals may have trouble keeping their savings secure, qualifying for credit or loans, and completing basic financial transactions. They may use more costly methods, such as check-cashing services or payday loans .

How can the unbanked gain access to financial services?

Community outreach programs such as the Bank On Initiative and Inclusiv Network help people from underserved areas access affordable and safe banks and credit unions.

Why is financial inclusion important?

Everyone should have access to safe and trustworthy financial services in order to manage their money, gain access to credit, and make thoughtful financial decisions.