Across Los Angeles County, more than half a million residents lack access to a single bank or credit union within their neighborhoods. For these Angelenos living in a banking desert – an area that lacks sufficient access to financial institutions – this means that they cannot easily deposit a paycheck, take out a loan for a new car, or even write a check to pay for everyday household expenses.
A survey by the Federal Deposit Insurance Corporation (FDIC) of unbanked households found that 57 percent of unbanked households cited “do not have enough money to keep in an account” as a reason for not banking. Nearly 11% cited “do not trust banks” and almost 10% cited “bank fees are too high” as the main reasons for not banking.
The cost of going unbanked
Traditional banking services have historically provided the basic financial building blocks for individuals and families to gain economic stability. Residents without access to banking services often do not have a savings account to save for their future. They are unable to access affordable credit to purchase a home, pay for higher education, or replace an older vehicle.
Further, when residents lack access to banking services they often turn to payday loans, check-cashing services, auto title loans, and other non-traditional forms of credit that charge high-interest rates and expensive fees, trapping consumers in a dangerous cycle of debt.
A study by the Brookings Institute calculated that a full-time worker’s reliance on check cashing could cost more than $40,000 over their lifetime. Hard-working residents could save thousands of dollars over their careers if they had access to low-cost checking and savings accounts provided by traditional financial institutions. The same study also found that if workers had access to financial advisors and investment tools, they could generate $360,000 over a forty-year career.