About 6% of American adults are “unbanked,” meaning they don’t have a checking, savings, or money market account. This percentage stayed level in 2022 and 2023, according to data from the Federal Reserve.
The Fed notes that accessing banking services can be important for a person’s financial well-being. The Federal Deposit Insurance Corporation (FDIC) encourages banking on the basis of financial safety, protection from scams and fraud, and convenience.
Who is unbanked?
According to the Fed, unbanked rates are higher among lower-income adults. Nearly a quarter of people with an income below $25,000 were unbanked (23%), compared to 8% of people with an income between $25,000 and $49,999, 2% of people with an income between $50,000 and $99,999, and 1% of people with an income over $100,000.
Living without a bank account was also more common among younger adults: 11% of 18- to 29-year-olds were unbanked, compared to 9% of 30- to 44-year-olds, 5% of 45- to 59-year-olds, and 2% of people 60 and older.
Along racial lines, Black (14%) and Hispanic (11%) adults were most likely to be unbanked, compared to 4% of white and Asian adults.
Why are people unbanked?
The Fed does not survey respondents on reasons for being unbanked, but a previous survey from the FDIC shows that as of 2021, the top reasons cited were not having enough money, not trusting banks, or having privacy concerns.
How do unbanked people use their money?
Aside from using cash, alternatives to banking include:
- Prepaid debit cards
- Nonbank online payment services such as PayPal, Venmo, and CashApp
- Nonbank money orders and check cashing
- Nonbank money transfer services such as Western Union, MoneyGram, Walmart Money Center, and Ria Money Transfer
According to the Fed report, 33% of unbanked adults use nonbank money orders and check cashing services, compared to 12% of banked adults. But the report notes that the use of these services has been declining in recent years as digital alternatives become available.
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Another digital alternative to traditional banking is cryptocurrency. It is more commonly used for financial transactions by unbanked adults (4%) than by those with bank accounts (2%).
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