30 million Americans have no banking options as banks refuse to serve them

Almost a quarter of the American households or 30 million Americans earning around $1.3 trillion annually are left with no banking options as the banks refuse to serve them. Banks don’t want to lose money and that seems to be the real reason. Although there are other non-financial institutions that are willing to serve this section, their offers may not have much value in the long run.

This seems to be reality with 30 million Americans as they have no banking options after Congress passed the legislation, which was meant to protect consumers from the high banking fees. Now, these consumers are left with no banking options as they don’t use any of the mainstream financial services and don’t have access to savings or checking accounts either. However, they use other nonbank financial services such as payday lenders, check cashers, and pawn brokers as well. Earlier, banks used to step in at such times as they could earn substantial revenue through overdraft and interchange fees. However, after the financial reform was brought in by Congress during 2010 following the Durbin amendment, the profits that banks could earn on debit card transactions, was slashed and this had a drastic impact on the overdraft fees that banks were charging their customers.As a response to these reforms, banks have brought in higher fees in order to discourage those in the lower income groups from either keeping or opening new accounts. This has been done intentionally as banks are no longer interested in serving customers who belong to the low-income segment.

This is bound to have a negative impact and will indirectly harm the ones who are unbanked. If these individuals don’t have access to any of the mainstream financial services, they will certainly not be able to save up for retirement, medical emergencies, college education, etc. Bank accounts provide security and they are much better options than cash. Having a savings account and direct deposits of paychecks not only help in adhering to a monthly budget, but they act as safeguards as well. Since the unbanked don’t have access to these facilities, they will always remain exposed to financial risks.

The numbers of unbanked are continuously on the rise, but the banks are avoiding them. Now, the big retailers will stand to gain as they are bringing in other cost-effective measures to offer financial services to people belonging to this segment.