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Are you Banked, Under Banked or Unbanked?

(Photo by Oli Scarff/Getty Images)

A lot has been written in recent months about voter ID’s. The most common argument heard is, “You can’t open a bank account without an ID.” According to a 2011 FDIC survey, people without bank accounts in 2010 have increased to 8.2% from 7.6% in 2009.

Due to growing mistrust of banking institutions consumers are exploring ways to rid themselves of their local bank dependency and looking for non-traditional ways of handing their money.

In many cases banks have become their own worst enemy when it comes to their levels of customer service. Banks have placed more and more fees and fines on consumers and a growing segment of society is beginning to rebel.

Banked, Under Banked, Unbanked

What do these three terms mean and how do they affect you?

“Banked households” are those that have a deposit account at an insured depository institution. This could be checking, savings or both. 68.8% of all households in the US are “fully banked.”

“Under Banked Households” are those that have a deposit account at an insured depository institution but also rely on “alternative financial services” providers. Examples of AFS providers would be payday loans, pawnshops, car title loan institutions, prepaid phone or credit cards. 20.1% of US households are “under banked.”

“Unbanked Households” do not have a deposit account at an insured depository institution and rely solely on money orders and the other alternative financial services. This group comprises another 8.2% of the population and the remainder isn’t sure what category they fall into.

Bank Fees and Regulations

There is no question that banks are feeling the heat from congress. Several portions of the Dodd-Frank Bill are placing more restrictions on the monies banks must keep on hand and how they administer loans.

In order to meet these imposed restrictions banks are faced with escalating costs that lead to higher minimum balances and additional fees to consumers. Write too many checks and pay a fee; too few and pay a fee.

The Market for the Unbanked and Under Banked

As you might imagine there are many companies that are more than happy to help the unbanked and under banked operate within our financial system. Smart phone apps are the most popular allowing consumers to pay bills that and pay at participating retailers. Debit cards are allowing those with suspect credit or no credit to enjoy many of the same advantages credit card customers enjoy without carrying cash that can be lost or stolen.

Some Final Thoughts

As you can imagine, people move in and out of these three categories as their life circumstance changes. Almost 30% of Americans are under or unbanked. That means there is a substantial market for any company that can address their challenges. Look for more creative ways for lower income Americans to enter our capitalistic system in a positive way.

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