Gaps in Access to Accumulation of Wealth: Bank Accounts

Many immigrants and those living paycheck-to-paycheck do not have access to or use the banking system.  They instead rely on cash checking services and payday loans that charge exorbitant fees. Prepaid debit card systems, like those from Mango and Green Dot, offer a fee-based accessible system that does not require a credit check and are acquired primarily through non-bank websites and stores. According to the most recent FDIC Survey, almost one-quarter of American households use these “alternative financial services” even if they also have a bank account. While a helpful alternative to check cashing and high-fee services, prepaid cards, pay day loans and the like are ripe for fraud and consumer bilking.  Recent federal regulations aim to curb some of the excessive fees and ensure more disclosure (see 83 FR 6364).

As the French sociologist, Pierre Bourdieu, noted, “[c]apital . . . takes time to accumulate….” . Bourdieu was talking about more than mere economic capital; he was referring to the larger concepts of social capital and cultural capital.  There is an interconnection between financial relations and social relations, and between social capital and economic capital.  For those whose social capital does not extend to the moneyed and upper class business and policy leaders, or whose cultural capital and social relations exist within their own impoverished neighborhood, there is little ability to leverage social or cultural capital for economic purposes to acquire and accumulate wealth.

According to the latest estimates by the FDIC, 7% of American households are “unbanked,” meaning no one in the household has a checking or savings account (primarily because they claim they do not have enough money to do so), and an additional almost 20% are “underbanked” in that they obtain some financial services and products outside the traditional regulated banking system.  Though these overall percentages have been declining over the years, the percentages for Black, Hispanic and low-income households remain troublingly high, as does the correspondingly low rate of saving for households in those categories.  Still, the gap in accumulated and inherited wealth remains large between white upper-middle class, college-educated families and everyone else.

The FDIC Survey report revealed that 55% of unbanked households do not feel that banks are interested in serving their kinds of households and about a third of those households indicated that they do not trust banks. Small, community focused banks like Spring Bank in the Bronx, NY (the first B Corp bank in New York State), work with local communities to gain trust and bring them into the more secure banking system.  Community-based credit building groups like ROSCA, commonly found in developing countries and among immigrant communities in the U.S., and the Mission Asset Fund in San Francisco, have also stepped in to provide more secure and dependable financial services outside the traditional banking system. CFSI is another good resource for research and resources on improving financial security and health for all Americans.

To learn more about the wealth gap in the United States, see our WEALTH page.

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