• “Unbanked” describes adults who do not use banks or credit unions at all — no checking or savings accounts and no access to mainstream deposit, credit, or payment services (they rely on cash, money orders, prepaid cards, check‑cashing, payday loans, etc.). (FDIC 2021; Investopedia)
– In the U.S., the share of unbanked households has fallen but remains concentrated among low‑income, less‑educated, Black, Hispanic/Latino, American Indian/Alaska Native, working‑age disabled, and single‑mother households. (FDIC 2021; Fed 2022; BCG)
– Main reasons people are unbanked: cost and minimum‑balance requirements, lack of trust or privacy concerns, lack of documentation, inconvenient branch hours or “bank deserts,” and limited perceived value from banks. (FDIC 2019, 2021)
What “unbanked” means (and how it differs from “underbanked”)
– Unbanked: no account at a bank or credit union. Uses cash and alternative financial services (AFS) like check‑cashing, payday loans, or money orders.
– Underbanked: has an account but still relies regularly on AFS (payday lending, money orders, check‑cashing) instead of mainstream credit and payment products.
(Definitions from FDIC household surveys and financial research.)
How many unbanked people and who they are
– FDIC (2021): about 5.9 million U.S. households (4.5%) were unbanked — the lowest level since FDIC started surveying in 2009. (FDIC 2021)
– Federal Reserve (Report on Economic Well‑Being of U.S. Households, 2022): about 6% of U.S. households were unbanked. (Board of Governors of the Federal Reserve System, 2023)
– Unbanked rates are higher for low‑income and less‑educated households and are disproportionately higher among Black and Hispanic/Latino households. A BCG analysis of FDIC data showed Black and Latino households are overrepresented among the unbanked relative to their population share. (FDIC 2019/2021; BCG)
Why people become unbanked
– Cost and minimum‑balance barriers: many cannot meet account minimums or afford fees. (FDIC)
– Convenience and access: bank branches may be far away or have limited hours; alternative service providers can be more convenient. (FDIC)
– Distrust and historical discrimination: past and present exclusionary or predatory practices (e.g., redlining, subprime targeting) reduce trust in banks. (FDIC; DOJ; Center for Responsible Lending)
– Documentation and immigration status: lack of acceptable ID or bank policies that exclude foreign IDs. (Treasury efforts address this)
– Perceived value and financial literacy: some feel banking products don’t meet their needs or they lack clear information. (FDIC; Money Smart)
Why being unbanked is a problem
– Higher costs: frequent use of check‑cashing, payday loans, and other AFS carries high fees and interest that erode household resources.
– Limited ability to build credit or savings: without bank accounts or reporting, people have a harder time establishing credit histories and saving efficiently.
– Increased financial fragility: lack of low‑cost credit and payment tools makes it harder to respond to emergencies. (FDIC; Fed)
– Unequal economic opportunity: persistence of unbanked status reinforces racial and income disparities. (BCG; FDIC)
Existing initiatives and policy responses
– Bank On initiative: local/state programs that promote low‑cost, safe accounts and partnerships between banks and community organizations (e.g., Bank on California). (Bank On / local governments)
– FDIC Money Smart: financial education curriculum for adults and youth. (FDIC)
– Treasury Section 326 implementation: allows acceptance of certain foreign government IDs to help immigrants open accounts. (U.S. Department of the Treasury)
– Federal payments to unbanked beneficiaries via prepaid debit cards: an option used for some federal benefit recipients. (U.S. Treasury)
– Consumer protection and enforcement: federal and state enforcement actions (e.g., DOJ settlements) and regulations aim to curb discriminatory or predatory practices. (DOJ; state regulators)
Practical steps — for individuals who want to get banked
1. Identify your needs
• Do you need low‑fee everyday transactions, bill pay, direct deposit, savings tools, or credit building? Prioritize features you’ll use.
2. Look for low‑cost or no‑fee accounts
• Search for “Bank On certified” or “low‑cost” checking/savings accounts; many banks and credit unions offer accounts with no monthly fee if you have direct deposit or maintain a very low minimum balance. (Bank On; local credit unions)
3. Consider online banks or credit unions
• Online banks often have lower fees and higher APYs. Community credit unions may be more flexible on fees and ID requirements.
4. Gather acceptable ID and documentation
• Bring government ID, proof of address, and — if relevant — foreign government IDs. The Treasury’s guidance on ID acceptance (Section 326) can help with documentation questions.
5. Start small and build habit
• Open an account, set up direct deposit if possible, automate a small recurring transfer to savings, and use account alerts to avoid overdrafts.
6. Use credit‑building tools safely
• Consider a secured credit card, a credit‑builder loan from a credit union, or services that report rent/utility payments to credit bureaus to start establishing credit.
7. Learn about fees and rights
• Read the fee schedule, ask about overdraft/NSF policies, and request low‑fee alternatives. Use financial education programs such as FDIC’s Money Smart.
8. Seek free counseling
• Nonprofits, community development financial institutions (CDFIs), and local agencies often offer free or low‑cost one‑on‑one financial coaching.
Practical steps — for community organizations and policymakers
1. Expand access and convenience
• Support branch expansion, mobile banking access, and extended hours; consider postal banking where appropriate to serve bank deserts.
2. Support Bank On and local account standards
• Promote Bank On certified accounts and partner with banks to ensure accessible product offerings for low‑income households.
3. Reduce barriers to ID and documentation
• Encourage acceptance of foreign IDs and alternative proofs of identity/address consistent with Treasury guidance to help immigrants and marginalized groups.
4. Regulate and limit predatory AFS
• Cap usurious payday lending practices, require transparent fee disclosures for alternative financial services, and enforce fair‑lending laws to restore trust.
5. Fund financial capability programs
• Invest in community financial education, counseling, and matched‑savings programs tied to account openings.
6. Encourage data sharing for inclusion
• Support safe, privacy‑protecting ways to allow nontraditional payment or savings histories to build creditworthiness.
Practical steps — for financial institutions
1. Offer low‑barrier accounts
• Create no‑ or low‑fee transactional accounts with low/no minimums and clear, simple disclosures that meet Bank On standards.
2. Be flexible on identification
• Implement compliant policies to accept a broader set of government‑issued IDs per Treasury guidance.
3. Invest in outreach and trust building
• Partner with community groups, hire local staff, provide multilingual materials, and design culturally competent services.
4. Provide affordable small‑dollar credit and credit building
• Offer small secured loans, credit‑builder loans, and report repayments to credit bureaus.
5. Improve transparency and hours/accessibility
• Publish plain‑language fee schedules, operate extended hours or mobile services, and provide fee‑free ATM access where possible.
Measuring progress (what success looks like)
– Lower unbanked rates (tracked via FDIC and Fed surveys).
– Reduced use of high‑cost alternative financial services and fewer overdraft/payday loans.
– Increased account usage: direct deposit, mobile banking, regular savings.
– Improved credit access and measurable reductions in disparities across race, income, and geography. (Monitored via FDIC, Fed, consumer protection agencies, and research bodies.)
Selected sources and further reading
– FDIC, “2021 FDIC National Survey of Unbanked and Underbanked Households” (2021).
– FDIC, “How America Banks: Household Use of Banking and Financial Services” (2019).
– Board of Governors of the Federal Reserve System, “Report on the Economic Well‑Being of U.S. Households in 2022” (May 2023).
– Boston Consulting Group, “Racial Equity in Banking Starts with Busting the Myths.”
– U.S. Department of the Treasury, guidance on Customer Due Diligence and identification acceptance (Section 326).
– FDIC, “Money Smart” financial education program.
– Investopedia, “Unbanked” (summary and explanation).
Editor’s note: The following topics are reserved for upcoming updates and will be expanded with detailed examples and datasets.