More than 40% of households making between $15,000 and $50,000 per year don’t use banks—and that number is growing, according to The Huffington Post.
The growth of the “unbanked” population takes a toll on our economy because people who don’t use banks can’t borrow money or access credit. This impedes consumer spending, which makes up 70% of our economy.
Those who live off the financial grid often do so out of necessity—they can’t afford the average $144 per year price tag of a checking account at a retail bank. Coupled with overdraft and other fees, the costs can add up fast.
Additionally, banks have been raising fees and balance minimums to price out “unprofitable” customers, allegedly because they are trying to make up for profits lost due to regulation. Consulting group Oliver Wyman reported to The Economist that 37% of consumer accounts lose banks money.
The unfortunate consequence is that unbanked Americans are often forced to turn to alternative financial services—including prepaid cards and payday loans—which are not subject to the regulations of banks and thus offer varying degrees of protection for users.