The other day I was walking towards my office and passed a check cashing place and took notice of how many of us were standing on line; to the point where there was a line out the door and down the block. Then it got me to thinking that there has be deeper reason behind this stigma.
Are African Americans allergic to the current banking system?
In a recent statement released by the FDIC that was based on a recent study, indicated that one in four US households (primarily low income and minorities) currently do not have a bank account. A key finding in the study reveals that particular racial and ethnic minorities are more likely to be underbanked than the population en masse. Of those minorities, the following demographic breakdown is as follows:
- Blacks - est. 31.6%
- American Indian/Alaskans - est. 28.9%
- Hispanics - est. 24.0%
Asians and whites are less likely to be lacking a bank account or baking services (7.2% and 14.9% respectively).
What could be driving these estimates? Lack of understanding on the types of services banks offer or the lack of trust towards a banks as a whole.
It appears that it may be a combination of both because interestingly enough, members of the American Banker's Association have begun to insist that federally insured banks are the safest place for your money.
In fact one of those members, Sheila Bair who is also the Chairman of the FDIC stated, "Access to an account at a federally insured institution provides households with an important first step toward achieving financial security – the opportunity to conduct basic financial transactions, save for emergency and long-term security needs, and access credit on affordable terms."
She continues to state, "By better understanding the households that make up this group – who they are and their reasons for being unbanked or underbanked, we will be better positioned to help them take that first step."
Many banks have begun to develop and execute programs focused on educating and encouraging minorities to begin using the financial banking system. However, despite their ongoing efforts, the number of African Americans without a bank account or beneficial banking services remains high.
For the time being many still continue to use these check cashing outlets to serve there everyday financial requirements.
