Banks look to new accounts to attract the unbanked as COVID-19 takes a toll
These are the most common bank fees that many banks charge to cover the costs of maintaining their bank accounts. USA TODAY
Millions of consumers – including people of color – aren't able to easily cash a check or visit an ATM because they're not customers of regular banks.
The top reasons given for not having a bank account include not having enough money to meet minimum balance requirements, not trusting banks, and believing bank account fees are too high and too unpredictable.
Banks across the country are now being urged to offer a more affordable type of account called Bank On accounts that allow for banking with little to no fees. Such accounts have low monthly maintenance fees and no overdraft fees.
The American Bankers Association on Monday called on every bank in the country to consider offering "Bank On-certified accounts" to expand access to banking services and reduce the number of unbanked and underbanked Americans. More than 40 banks offer such accounts today. The minimum opening deposit could be $25 or less.
Don't panic and diversify: Here are 4 key investing moves to make before the presidential election
No one in the house has access to even a basic checking account or savings account in roughly 7.1 million homes, or 5.4% of U.S. households, according to a survey released Monday by one of the nation's bank regulators on “How America Banks.”
The good news is that a healthier economy in recent years has meant the lowest level of “unbanked” consumers in 10 years of the survey. The peak was 8.2% in 2011, and the level was 6.5% in the previous survey for 2017.
The Federal Deposit Insurance Corp. takes a hard look at how consumers use the banking system every two years in partnership with the U.S. Census Bureau. The latest survey involved responses from 33,000 households.
Unbanked numbers could rise in 2020
Yet the economic fallout in 2020 could drive more people out of traditional bank accounts.
FDIC surveys show that those who are unemployed are four times more likely to fall into the unbanked category, according to Karyen Chu, chief of the banking research section at the FDIC Center for Financial Research.
Workers who experience significant variations in pay from week to week also are more likely to not have a basic checking or savings account.
"Even individuals who did not lose their job may be working fewer hours and may therefore have reduced income," the FDIC report noted in a COVID-19 related postscript.
"One effect of these conditions is likely to be an increase in the unbanked rate
from its level just before the pandemic," the report noted.
Race and ethnicity also come into play, as Black and Hispanic consumers are more likely to not have any bank account than white consumers.
About 13.8% of Black households fell into the category of the unbanked in 2019, down from 16.8% in 2017.
About 12.2% of Hispanic households were unbanked in 2019, down from 14.4% in 2017.
By contrast, 2.5% of white households fell into the unbanked category, according to the FDIC survey.
States in the South often had the highest levels of unbanked consumers. Unbanked rates ranged from 0.5% in New Hampshire to 12.8% in Mississippi.
States including Michigan, Illinois, Kentucky and New York ranked fairly high with a range of 5.6% to 7.6% of unbanked households. States including Texas, Tennessee, New Mexico and Louisiana ranked higher with more than 7.6% of households being unbanked, according to the FDIC data.
Where to find a lower-cost bank account
Consumers can often avoid monthly maintenance fees or obtain lower fees if they have direct deposit set up for a paycheck or regular deposits, such as Social Security checks. Credit unions, which also offer insurance on accounts, also may have lower fees.
Another option to consider, according to the FDIC, is to consider a “checkless” checking account for a first bank account. You’d use a debit card, instead of writing checks.
“As an FDIC-insured bank account,” the FDIC notes, “a checkless account may allow you to access your account and pay your bills online or using a mobile app.”
"Checkless accounts typically enable customers to avoid spending more than the amount available in the account, which means if there is not enough money in your account to cover a transaction, the transaction will not go through and you will not be charged a fee," according to the FDIC.
More education – and fewer hidden fees – clearly will be needed to encourage more people to opt for insured bank accounts, especially in light of the economic pressures being faced today by lower-income families and others.
ATMs weren't always available on every street corner. Here's how the magic money dispenser evolved over the years. USA TODAY