Reducing the number of Americans who are “unbanked” or “underbanked” has been a recurring topic of discussion among advocates for both financial trade associations and consumer protection groups for several years. The Federal Reserve’s annual report on the Economic Well-Being of U.S. Households indicated that there is progress being made in that respect.
Economic growth during 2018 occurred alongside with a continuing decline in the amount of unbanked Americans. Since 2015, the number of unbanked citizens has dropped from 8 percent to 6 percent, according to the report.
The Fed’s findings uncovered a greater drop in the number of “underbanked” Americans — those with a bank account but who also use alternative financial services. Underbanked Americans decreased from 21 percent in 2015 to 16 percent in 2018.
“Although the majority of U.S. adults have a bank account and rely on traditional banks or credit unions to meet their banking needs, gaps in banking access remain,” the report states. “Six percent of adults do not have a checking, savings, or money market account (often referred to as the ‘unbanked’). Two-fifths of unbanked adults used some form of alternative financial service during 2018 — such as a money order, check cashing service, pawn shop loan, auto title loan, payday loan, paycheck advance, or tax refund advance. In addition, 16 percent of adults are ‘underbanked’: they have a bank account but also used an alternative financial service product. The remaining 77 percent of adults are fully banked, with a bank account and no use of alternative financial products.”
Additionally, the Fed found improvements in savings practices among Americans surveyed for the report.
The number of Americans who said they could cover a $400 emergency expense has risen 11 percentage points since 2013 to 61 percent, according to the report. About 70 percent of respondents said they had savings sufficient to cover three months of expenses or could do so via a combination of savings, assets and credit if they lost their main source of income.
“While the prior question asks about a hypothetical expense, the survey results indicate that a number of people struggle to pay their actual bills,” the report states. “Even without an unexpected expense, 17 percent of adults expected to forgo payment on some of their bills in the month of the survey. Most frequently, this involves not paying, or making a partial payment on, a credit card bill. Four in 10 of those who are not able to pay all their bills (7 percent of all adults) say that their rent, mortgage, or utility bills will be left at least partially unpaid.”
The report also indicated that 26 percent of non-retired respondents have no retirement savings or pension, including 13 percent of those over the age of 50.
Overall, three quarters of U.S. households surveyed last fall said they are “doing okay” or “living comfortably,” a 12 percent increase from 2013. Seven percent indicated that they were finding it difficult to get by, a nearly 50 percent decrease since 2013. Thirty-one percent said they were better off than the year before, and 13 percent said they were worse off. The remainder indicated no significant change in their financial well-being.