By Al Tompkins
The Federal Deposit Insurance Corp. reported this week that more than one in four American households say they have no bank checking account or have used "alternative" financial institutions such as check-cashing stores and pawn shops. The findings come from the FDIC's 2009 National Household Survey.
The report says that blacks (an estimated 31.6 percent), American Indian/Alaskans (28.9 percent) and Hispanics (24 percent) are more likely to be "underbanked." These groups answered "no" to the question: "Do you or does anyone in your household currently have a checking or savings account?"
"Underbanked households were defined as those that have a checking or savings account but rely on alternative financial services," the FDIC explained. "Specifically, underbanked households have used nonbank money orders, nonbank check-cashing services, payday loans, rent-to-own agreements, or pawn shops at least once or twice a year or refund anticipation loans at least once in the past five years."
The FDIC went on to say that moreover, blacks, Hispanics and American Indians or Alaskans are more likely to be "unbanked" -- "answering 'no' to the question, 'Do you or does anyone in your household currently have a checking or savings account?' " An estimated 21.7 percent of black households are unbanked, as are 19.3 percent of Hispanic households and 15.6 percent of American Indian/Alaskans.
The FDIC has been looking at this issue for some time. ItsWeb site collects previous findings and a fair amount of video from previous hearings.
USA Today put together an interactive map showing underbanked households by state and summarized the report, saying "the FDIC will use the data in its effort to persuade more banks to offer 'starter accounts' ":
"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.'
"The FDIC will use the data in its effort to persuade more banks to offer 'starter accounts,' low-cost, no-minimum checking accounts without automatic overdraft programs that can result in customers getting hit with fees if they go in the red. One option, Gruenberg said, is to offer incentives to banks through the Community Reinvestment Act, which encourages banks to do business in low- and moderate-income communities.
"Banks already are required to offer low- and no-cost checking, but a 2008 FDIC survey showed that 77 percent of large banks use automated overdraft programs."
An FDIC site provides just-released data about the financial health of any bank that the FDIC insures.More from the FDIC:


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