Roughly 20 percent of all black and Hispanic households are without checking or saving accounts, essentially leaving them completely shut out of the burgeoning American banking system.
At a time when a growing segment of citizens use online banking, some even depositing paychecks using their cellphone camera, many minorities are still subjected to a “kick them while their down system” where it costs them money to get money.
Typically, most check cashing agencies charge a minimum of $6 to cash a check, and without bank issued credit cards, most of those same victims have to turn to payday loans and emergency lenders who routinely charge triple digit interest rates. Without sufficient banking, even those seeking services as rudimentary as renting an apartment must purchase fee-based money orders as a means of safeguarding larger amounts of currency.
Indeed, long gone are the days when banks merely served as institutions to place funds beyond temptation’s reach. “A bank account in a way has become like a passport or a driver’s license,” said Jennifer Tescher, CEO of the Center for Financial Services. “It’s kind of an access device.”
And, in that respect, far too many minorities prove their access is far too limited. Even as pre-paid debit cards seem to grow more popular and systematically convenient by the day, the truth is they hardly serve as an adequate substitute for direct bank deposits.
While retailers like Wal-Mart allows pre-paid card holders to directly deposit their paychecks into their accounts, only one cash withdrawal per pay period is free, all others transactions costing a minimum of $2 each. The only way customers can avoid the fees is by shopping at Wal-Mart and getting cash back at checkout, effectively limiting all their options to the behemoth retailer’s facilities.
And then, there are people like Kim James, born of this new economy or lack thereof. For nearly all of the last decade, James has been homeless in part because she claims she had no place to save money.
Two years ago, while staying at yet another shelter, she met Duke University student and Community Empowerment Fund volunteer Janet Xiao. Empowerment Fund members travel to facilities like the Dove House where James stayed which offered life skills training, including a class on personal finance and how to reestablish banking credentials.
In the face of such support, not to mention help in getting a part-time job, James opened a new account at the Self-Help Credit Union. And it’s serving as her entrée back into a world where she can again be self-sustaining.
Within a few months, she saved enough to security and the first month’s rent on a new apartment. “Now when I get even $10 or $20, I go to the bank and deposit it,” she said.
Self-Help is part of a growing stable of financial institutions called Community Development Financial Institutions that supported by the U.S. Treasury Department and dedicated to aiding those without banking access get back into the system.