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Financial Inclusion: Ways to Help the Underbanked Featuring: @OperationHOPE
Join our #CreditChat every Wednesday at 3 p.m. ET. This week, we discussed options for the underbanked. “
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A 2013 study by the FDIC revealed that 20% of U.S. households are underbanked.
This equates to 24.8 million households that are using
alternative financial services outside of the banking system.
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Source: Federal Deposit Insurance Corporation (FDIC)
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What does it mean to be underbanked?
“Underbanked” means to have limited or no access to mainstream financial services.
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Source: Operation HOPE
Underbanked people have poor or limited access to the major financial services normally offered by banks. This can
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include things like checking, savings accounts, loans, ATM access, etc.
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What are some reasons a person would avoid having a bank account?
Many bank accounts require a minimum balance, or charge maintenance fees and hefty overdraft fees. Those without stable income certainly still have bills, so there are times
when they have to make the decisions to pay the overdraft fee or miss the bill payment.
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Source: Operation HOPE
Individuals and communities can be underbanked. The need for financial services still exists, so they go to expensive alternatives.
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Some people don’t trust banks, especially if their parents or other family members avoided them, too.
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People opt to not keep their money at a bank for fear of malpractice and fees.
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Typically, the unbanked and underbanked tend to be poor and working class people who choose to stay away because they either don’t have the financial resources to maintain a bank account, or lack of
knowledge of how the banking system works.
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Source: Bankrate
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What financial services do the underbanked use?
The underbanked may use payday loans, tax refund-advance and structured settlement-advance loans. Typically high rates and fees.
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Prepaid cards and check cashing services (stores and retail environments) are two. They also sign checks over for others to cash.
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Unfortunately, these services tend to take advantage of the underbanked - Capitalizing on their lack of financial knowledge.
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How does financial illiteracy affect the underbanked population?
Financial illiteracy can keep the underbanked population from learning what they can do to improve their situation.
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Financial literacy helps people become more aware of the overall financial impact one decision may have. When you know better, you do better.
Tweet by @FacingFinances
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What changes are taking place in the banking industry to appeal to the underbanked?
A lot of banks are sponsoring financial education programs to reach the underbanked.
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Financial literacy programs. They are using organizations like Operation HOPE to reach those unbanked in various communities.
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More and more banks are offering bilingual services and customer service for non-English speakers.
Tweet by @Finovera
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What are some options available to those whowere/are unemployed or have poor credit?
Secured credit cards are a great way to help someone build credit so they can eventually move on up to a better card/loan.
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Cash still works great. Prepaid cards are good. If unemployed, start your own side hustle and make things happen.
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Go to a local credit union and let them know you are trying to rebuild your financial situation.
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What final tips can you share to help the underbanked?
You can have it. Don’t give up! Think outside the box and research. There are great options out there.
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Seek out resources for financial education - they exist to empower you and help you gain control of your financial picture!
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Check out all the resources and tips shared:
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