Closing the Underbanked Gap in the United States

By Erica Mancinas | Manager of Service Delivery | The Financial Clinic

The benefits of owning a bank account or participating in the formal economy through traditional financial services have long been supported by experts across banking, financial, and social service sectors. Some of these benefits include having a secure place to store money, building a banking history, cashing and depositing checks for free, and engaging in financial transactions for free or low costs, to name a few. By taking advantage of banking services that best fit one’s need, families and individuals find themselves in the best position to achieve financial goals, experience economic mobility, and increase their financial security.

However, according to a national survey released in October 2016 by the Federal Deposit Insurance Corporation (FDIC) on underbanked and unbanked households in the United States, in 2015, approximately 20% of U.S. households were “underbanked”. This means that although households had at least a traditional checking or savings account, those same households also used products or services from alternative financial services in the past 12 months. Such products include money orders, check cashing, international remittances, payday loans, refund anticipation loans, rent-to-own services, pawn shops loans, or auto title loans (FDIC, 2015), all of which often include exorbitant fees or unfair terms. Among unbanked households, the top three reasons cited for not having a bank account include households feeling they “do not have enough money to keep in an account,”  that “avoiding banks gives more privacy” and that households “don’t trust banks” (FDIC, 2015).

Moreover, the aforementioned study by the FDIC highlights an opportunity that both customers and practitioners should note, by shedding a light on the most common gaps in banking services to about one-fifth of the total households in the U.S. In fact, most of these gaps revolve around information of banking services.  Finally, finding reliable and accessible resources on financial institutions that fit one’s personal needs and preferences need not be confusing, time-consuming, or intimidating. Below is a list of the best practices and resources on overcoming banking challenges, gathered and approved by expert practitioners on Change Machine:

  • Language barriers: Most banks and credit unions offer real-time services in multiple languages via online, phone and in-person mediums. To learn about services in a specific language, call the main office or search online for language services offered by a bank or credit union.
  • Required documentation: At a minimum, banks are required to obtain the following information to open an account: Name, date of birth, address, and identification number. For identification number, this can include an ITIN (individual taxpayer identification number) or SSN (social security number), or any other government-issued (may be from a foreign government) identification number that proves one’s residency.
  • Information sharing: Banks do not share personal information about their clients with third-party institutions or immigration authorities, except in the very rare circumstances when there is a court order or a criminal investigation. (See Change Machine tipsheet Getting Banked In America.)
  • Minimum deposit requirements: Look for bank accounts with the most features (high-interest rates for savings accounts, debit cards, direct deposit options, auto bill pay) for the least amount of money (no monthly account fees, no minimum balances, low ATM fees). Don’t forget that under some state laws, banks must offer a “lifeline account,” which is a basic banking service at low cost. Explore online at to see if the national “Bank On” movement has reached your city. (See Change Machine tipsheet 6 Easy Steps to Open a Bank Account.)
  • Religious considerations: The following is a list of Sharia compliant financial services, ranging from savings accounts to interest-free loans and credit cards.