An estimated 10 million American households — about 8 percent of all households — are “unbanked” and one in five households — 24 million households with 51 million adults — are “underbanked.” These are households which don’t have accounts at banks and other mainstream financial institutions and use cash for most of their transactions. As a result, notes the FDIC, these “cash consumers pay excessive fees for basic financial services, are susceptible to high-cost predatory lenders, or have difficulties buying a home or otherwise acquiring assets.”
The highest unbanked and underbanked rates are found among non-Asian minorities, lower-income households, younger households, and unemployed households. Close to half of all households in these groups are unbanked or underbanked compared to slightly more than one-quarter of all households.
One of the most common reasons people have for avoiding checking accounts is overdraft fees. If you write a $10 check and it “bounces” (fails to clear because of lack of funds) most banks will charge you a $35 per transaction fee. According to the Consumer Financial Protection Bureau, the average overdraft fees paid per bank customer was $225. If you make less than $20,000 a year, you can easily find yourself paying one percent of your annual salary on overdraft fees alone.