Almost a third of households which closed bank accounts between 2009 and 2010 did so because of unexpected or unexplained fees, according to a report from the Pew Health Group.
“Slipping Behind: Low-Income Los Angeles Households Drift Further from the Financial Mainstream” documented the decline of banking households in the lower-income Hispanic community and concluded that in those years more Hispanic households abandoned mainstream banking than began it.
Lower income households also faced challenges in making monthly minimum balances to maintain checking accounts, the report found, and often resisted accounts because of their perceived lack of liquidity.
The paper recommended financial institutions institute “fair and transparent” fees as well as end the practice of delaying deposit availability and broadening the number and range of its ATMs.
There are high stakes for lower-income households in having a bank account as the study found that those households with bank accounts were also much more likely to save money, even in a depressed economy.
“Even when faced with high rates of job loss and declining household income during the period of our survey, the banked were better able to sustain their savings behaviors, including those associated with long-term goals such as paying for college,” the report said. “Eighty-eight percent of banked households have at least one savings account and, even in times of economic turmoil, 67% of the Banked actively save at least some of the time. Among the unbanked, only 9% report being able to save,” the report added.
One impact of the Durbin amendment's cap on debit card interchange for larger asset issuers has been to increase bank fees, a development which some have seen as hurting lower-income households the most.