A study just released by the FDIC states that one in four American households do not have checking or savings accounts. They have given these people a name: The Unbanked. Not to be confused with the Underbanked, which is the name given to people who have some sort of bank account but rely on other avenues to manage their financial needs. Pawnshops, payday lenders, check-cashing services are the venues where the “Underbanked” dwell. It is no surprise that the people making up these classifications are also known as the “low-income” ones. What is also not surprising is that the FDIC would be undertaking a study to look at why people are not using banks like they used to. Banks have failed, tightened credit, increased fees, and dinged people with $35.00 overdraft fees for a $5.00 cup of coffee. Confidence in the banking system is down and banks have less of our money to invest with, less of our loans to sell to investors, and more scrutiny than ever before. Banks are worried, and they now are suddenly concerned with helping the Un and Under banked people of this country.
Interest rates on savings accounts are at an all time low, prompting many to question whether the bank, with its limits on withdrawals and added fees, is the right place to store the little savings they have. There is no doubt that have a savings account, and having a commitment to paying yourself first every time you receive any income, is the best way to ensure financial stability through hard economic times. And children from low income families who have savings, studies show, have the best chance for upward economic mobility in the future. But confidence in the banking industry as a whole is low, and media stories about troubled financial institutions are not instilling the confidence needed for would-be savers to turn their cash over to the bank.
Alternatives to traditional bank savings accounts abound on the internet. Sites where one can save up for a specific goal, join a savings club, and seek support from other “un-bankers”, abound. Retail chains have partnered up with some online savings forums and offered a boost on the interest offered in the form of a retail shopping card when the goal is met. Saving on these sites can be linked to a person’s social network and family members and individuals can deposit into the savings account online and track the progress being made on the savings goal. Just as alternative lending sites have gained popularity, so are these alternative saving sites gaining recognition.
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