Gains in bank access likely hurt by virus

CHARLOTTE, N.C. — More Americans than ever obtained a basic bank account in 2019, the Federal Deposit Insurance Corp. said Monday.

The data was gathered before the outbreak of the coronavirus and start of this historic recession. But the agency noted the loss of jobs and incomes due to the pandemic in 2020 likely reversed these positive trends.

The FDIC study looks at the unbanked — Americans who do not have a basic checking or savings account — and the reasons why these individuals are outside the traditional bank system.

While a small number of Americans choose not to have a bank account due to their distrust of the banking system, most unbanked are in poverty and more likely to be Black and Latino, a remnant of the systemic racism that plagues the financial system.

The FDIC estimates that 5.4 percent of Americans in 2019 were considered unbanked, a record low for that metric since the report started in 2009, down from 6.5 percent in 2017 which is when the FDIC looked at the unbanked.

That’ equal to roughly 7.1 million households, the FDIC said.

The 5.4 percent figure doesn’t tell the full story, mostly because racial and ethnic minorities are disproportionately more likely to be unbanked.

The FDIC study shows only 2.5 percent of Anglo households are unbanked, while 13.8 percent of Black households and 12.2 percent of Hispanic households are considered unbanked. Roughly one out household in fourmaking less than $15,000 a year does not have a bank account.

The Great Recession caused millions of Americans to lose their bank accounts, and the number of unbanked hit a record high of 8.2 percent in 2011 in the aftermath of the financial crisis.

Further, the pandemic has caused job losses mostly forworkers who need to be physically present for their jobs — restaurant workers, bartenders, theater workers, those working in retail, etc. Many of these jobs are lower paying and have fewer steady paychecks compared to the typically white-collar office worker now working remotely.

“Taken together, these data suggest that the unbanked rate is likely to rise from its level just before the pandemic,” the FDIC said.

The unbanked have significant and costly disadvantages in their everyday lives compared to the banked. Routine payments to landlords, utility companies, or sending money to friends and family often requires using expensive check cashing or money transfer services.

Further, being unbanked makes it more difficult to get quick access to government programs, including the $1,200 stimulus payments that came earlier this year from the stimulus bill.