Illinois Asset Building Group - Building Financially Strong Families and Communities

The FDIC recently released its 2009 National Survey of Unbanked and Underbanked Households. The nationwide survey analyzes the quality and prevalence of unbanked and underbanked households, defined respectively as households in which no one has a checking or savings account and households in which at least one person has a checking or savings account but still rely on alternative financial services. The report breaks down the data by each state and Metropolitan Statistical Area (MSA). Within each region, the report also examines how other barometers of financial stability (income, education level, race, etc.) correlate with a household’s status as banked or unbanked.

The statistics for Illinois are quite revealing.

- Over 50% of black households are either unbanked or underbanked
- Over 27% of Hispanic households are either unbanked or underbanked
- 37.1% of households with annual earnings less than $30,000 are unbanked
- 68% of households with annual earnings less than $50,000 are underbanked
- 30.8% of single-mother households are underbanked

The relationship of a households’ financial insecurity and its status as unbanked can be understood as a cyclical relationship. An original level of economic hardship makes it less likely for the household to believe they have enough finances to warrant an account at a bank or credit union and less likely for those institutions to attract these consumers. These households are forced to rely on alternative financial services, like check-cashers and payday lenders. The former can cost households hundreds of dollars a year. And the latter imposes the risk of pushing households even deeper into debt and economic hardship. The absence of a strong financial relationship with a bank and credit union leaves these families even more economically marginalized and thus even more unlikely to find a welcoming atmosphere at these institutions, fostering more alienation, and the cycle of continues.

Banks must bridge the historical divide that has inhibited many of these households from opening accounts, which means offering safe and responsible products. IABG is working to advocate that products offered by institutions in the Bank On Illinois campaign meet minimal requirements, including provisions that best serve the interests of new customers.

For more information on un/underbanked data, see FDIC’s report at www.economicinclusion.gov. For more information about the Bank On Illinois campaign, visit www.bankonillinois.org.