More than 9% of Mississippi households are unbanked, compared to just over 1% of households in Utah, New Hampshire, or Colorado.
These disparities reflect broader systemic barriers to wealth building and economic opportunity for marginalized communities.
Why financial inclusion matters
Financial inclusion—access to high-quality, low-cost, user friendly financial services—allows people to manage their money today and to plan for the future. But lacking these services imposes significant costs on individuals and society. Today, 62 million Americans are unbanked or underbanked—equivalent to twice the population of Texas.
These households pay hundreds of dollars annually in fees just to access basic financial services. This money, which could go toward essentials like rent, food, or education, instead goes to banks, payday lenders, and check-cashing services. The consequences fall hardest on low-income families, people of color, single mothers, and people with disabilities, exacerbating income inequality and hindering economic mobility.
Addressing financial exclusion could return billions to households, reduce reliance on predatory services, and create a more equitable economy.
What does it mean to be unbanked or underbanked?
- In unbanked households, no one has a checking or savings account at a bank or credit union.
- In underbanked households, at least one member has a checking or savings account but used at least one non-bank transaction or credit product in the last year. These can include check cashing, payday loans, pawn loans, and international remittances.
Who is most affected?
Nearly 1 in 5 people in the U.S. are unbanked or underbanked.
The impact of financial exclusion is deeply unequal. The share of un- and underbanked people has declined meaningfully since 2011. This was likely facilitated by innovative services like neobanks—digital-only, low-cost banking providers. However, financial inclusion has stagnated since 2019, suggesting a need for new solutions that focus on the populations that are the hardest to reach.
Financial exclusion affects low-income households most.
Nearly 40% of households that earn less than $15,000 annually are under- or unbanked, compared to just over 10% for those who earn $75,000 or more. A third of unbanked households make less than $30,000 annually.
Black households are 5 times more likely to be unbanked than white households.
Single parents, and especially single mothers, are disproportionately represented among the unbanked and underbanked.
More than 40% of immigrants who are not citizens lack financial access, often due to requirements for multiple forms of ID.
What are the causes and costs of financial exclusion?
The primary barriers to financial access for unbanked households include not being able to meet minimum account balance requirements, facing high or unpredictable fees, and having a lack of trust in banks.
Banked households incur costs like account maintenance, overdraft, and ATM fees. These may appear small, but they weigh more heavily on those with the least resources. Low-income households are more likely to incur punitive fees for overdrafts, less likely to have enough money in their bank account to avoid minimum balance charges, and more likely to have to use expensive services like payday loans.
Financial exclusion costs individual households between hundreds and thousands of dollars annually.
Nationally, we estimate that fees cost under- and unbanked households more than $22 billion yearly.
The effects ripple through communities, reducing savings and financial freedom. Banking or payday loan fees can make the difference in paying for rent or food. An accidental overdraft can mean a missed rent payment, resulting in evictions or other dire consequences.
Estella Mora, a caregiver for the elderly and disabled in Oxnard, CA, estimated paying $400 in overdraft and minimum balance fees on her bank account in 2023.
“That makes it impossible for me to save money,” she told Capitol Weekly.
Deysi Gomez, a worker at a McDonald's in San Jose, CA, could not open a bank account for years because she only had a non-U.S. ID. Instead, she cashed checks at a store.
"I would walk up to four hours just to get to that location to change my check," she told LAist.
A check cashier closer to home would charge Gomez 6% for every $100.
What would a better world look like?
Expanding financial inclusion has many benefits:
- Keeping more money in families’ pockets, benefiting their overall well-being and allowing them to spend it where they need it most.
- Increasing spending at grocery stores, on education and health, on recreation, and other areas that generate broader economic activity.
- Reducing the use of payday loans and other risky alternatives.
- Bringing more people into the formal banking system, further increasing economic activity and government revenues.
- Potentially reducing the need for some government services as families are better off.
Efforts across the U.S. are paving the way for solutions:
CalAccount
In California, the State government and a coalition of advocates support CalAccount, a zero-fee, zero-penalty debit account and debit card program that creates an alternative for every Californian.
The Campaign for Postal Banking
The Campaign for Postal Banking is pushing for affordable financial services offered through the U.S. Postal Service and its thousands of locations in every community.
Digital Bank Accounts
Other researchers and policymakers are exploring the possibility of creating digital bank accounts through the U.S. Department of the Treasury or the Federal Reserve.
Financial inclusion isn’t a luxury—it’s a necessity. Addressing the barriers to banking access is urgent, achievable, and transformative. It’s time to act.
Find out what financial inclusion looks like in your state!
Brought to you by HR&A Advisors, Digital Products Labs.