Imagine your daily life without using a debit card to pay for groceries or pulling up your bank app to check your account balance. But that is the current reality for millions of Americans.
According to a recent survey by the FDIC, data from 2023 reveals over 5.6 million unbanked households in the U.S. In other words, they don't have a checking or savings account. That's a record low number since the survey began in 2009, but some groups were more likely to not have a bank.
The survey shows that people who are disabled, lower-income, less educated, Black, Hispanic and living in single-parent households are more likely to be unbanked. Most single-parent households are run by women, and those households had an unbanked rate of 13.4% versus 7.8% of single-father households, the survey said.
"When you don't have banks, you don't have access to really basic things that we take for granted," said Valerie Rivera, a certified financial planner and founder of First Gen Wealth.
"Even in a dual-income household, women continue to carry the bulk of responsibility for child care," Rivera said. "And if you couple that with you're doing this on your own, and you are working, it's really difficult to find the time and the understanding to stop and say, 'How do I make my financial situation better? How do I figure out banking?' Because you're in survival mode."
Challenges persist when you're unbanked
While there are a lot of hurdles if you don't have a checking or savings account, here are some major ones:
Difficulty getting a loan or credit card. Getting a loan, credit card or mortgage can be nearly impossible if you don't have bank statements or documents showing you have a certain level of assets.
"Even getting a credit card can be out of the picture, which for a lot of lower-income people —especially if they have inconsistent income — credit cards can help them with cash flow," said Tiffany Johnson, a certified financial planner and co-founder of Piece of Wealth Planning.
Limited shopping options. If you don't have access to a credit or debit card and can only pay for things with cash, you can limit your purchases and be barred from shopping online and in stores that only accept cards.
Theft and loss issues. If you keep a lot of cash on hand, there are many theft and loss issues, Johnson notes. This depends on whether you're keeping it secure or locked up. Is it easily accessible? Is it something you can lose?
High fees. If you don't have a bank to cash a check, you'll need to go to a cash-checking center. The fees can vary depending on where you cash the check and the type of check. For example, there might be different fees for a government-issued check versus a payroll check versus a personal check.
Fees can be anywhere from 1% to 12% of the check's value. Or there might be a flat fee that's tiered and depends on the amount. Especially when money is already tight, those fees can have a larger impact and hurt you.
"There are so many transactions that we do that involve bank accounts, and it's the people who earn the least that pay the highest fees for not having that level of access," said Rivera.
Financial planning is harder when there's no time
When you're a single mother and doing the job of two people by yourself, time is the biggest resource you just don't have access to, says Rivera.
Besides working and taking care of your children, if you're low income, chances are you don't have a job where you're working from home, which means a commute and added costs. "You're likely trying to get through your day, and you're not thinking about tomorrow," said Rivera.
In turn, you might be so exhausted and overwhelmed that you can't research and determine which bank is the right one for you. As Rivera mentions, you know you need to find a bank and do your homework; you know that not having a bank account isn't working. However, you don't know where to start and don't have the time to figure it out.
Gender wage gap presents hurdles
The gender wage gap can potentially prevent single moms from opening a bank account, Johnson says. According to Pew Research, women continue to earn 82% of what their male counterparts earn.
The reasons behind this can vary, but it can be attributed to factors like women treated differently than men in the workplace, making different choices when balancing work and family and working in jobs that pay less than men.
Because a lot of financial institutions still have account minimums or require that you have a certain number of monthly deposits dropped into your checking account to avoid a banking fee, it might make it harder for a single mom to meet those thresholds.
"If it's a lower-income single mom household, I think there is hesitation to just go all in with a bank account if cash flow is not as consistent," says Johnson. "They don't want to get hit by fees."
Leveling the playing field
If you're unbanked, the first thing to do is acknowledge that it's a change you want to make. Maybe the negative impacts are costing too much, and you want to do something different.
Set aside the time. Rivera recommends spending an hour or two in the next few weeks to map your next steps. "Put it on your calendar," she said. "Because there's never going to be a time in your life when you feel like looking up bank accounts right now."
Do your homework. If you're unsure about opening an account with a big bank, you can look into local credit unions or online banks that offer free accounts. You'll want to look for no monthly account fee and no account minimums to open and maintain an account. If there are fees, see what the requirements are and if you can comfortably meet them. Watch out for overdraft fees.
Another thing to keep in mind is the potential downsides of not using a big bank. For example, some online banks don't allow cash deposits or don't have ATM access. Credit unions typically have membership requirements and might not offer as many branches. "You want to find the one that's going to be the best for you and what you need," Rivera said.
Consider an online bank. As banking has changed a lot over the years, some folks may not realize they can open an account online instead of having to step foot inside a brick-and-mortar location. Online banks also typically have lower fees.
