BANKS

Hispanics are one of the groups least likely to invest in the most basic entree to the American financial mainstream, a bank account. 

Unbanked, where no one in a household has a checking or savings account

Underbanked, where a household has a bank account but goes outside of the bank for financial services such as money orders, check cashing, payday loans, and more.

The unbanked and underbanked are more likely to have low income, less education, or be in a racial or ethnic minority group. According to a report on the economic well-being of the U.S Households in 2018 – May 2019 done by the federal reserve 14 percent of African Americans and 11 percent of Hispanics are unbanked, versus 4 percent of whites.   

For those working in the U.S. without legal status, it’s tougher to access financial services, although several lending institutions have in recent years extended services to undocumented immigrants with consular identification cards and taxpayer-identification numbers, used in place of a Social Security number. But the overarching reasons, including for many who live and work here legally, are a lack of readily available cash.

Many households don’t have a bank account because they don’t have enough money to keep in an account, account fees are too high or too unpredictable, or they don’t trust banks, according to the FDIC study. The top two cited reasons for not having a bank account:

53% of unbanked households cited “Do not have enough money to keep in an account”

30% of unbanked households cited “Don’t trust banks”

As a result, many unbanked consumers pay their bills with cash or money orders.

Like Miguel mentioned in the credit episode from last week, paying bills on time through your bank account can help you boost your credit score. You can do this by listing your bills in the Experian app that Miguel mentioned. How this works is  You can get credit for bills like Netflix, phone, and utilities. You can combine this as previously mentioned with the secured credit cards, which then can help you build even more credit and have financial stability.

{So How do Banks work??}

What is a bank?

It’s a home for your money Institutions that take deposits, make loans, and cash your checks.

Why open a bank account?

Easy access to depositing and withdrawing money through ATMs and direct deposits of your checks through work. You can start building credit, you can manage your account online through their websites or apps, and it’s even insured by the FDIC up to $250,000. 

The majority without a bank account think that the fees banks have are fairly steep. However, Steeper still is the interest on money that’s borrowed from payday loan shops. These have mushroomed in low-income African American and Latino neighborhoods where people have limited access to credit. 

How do banks make money?

Through % Interest on loans made to companies and people as well as fees through your account which are avoidable by learning the rules set by the bank. However, they are also able to pay a small amount of interest on money held in your savings accounts this is due to the fact that. When you put money in a savings account, the bank is technically borrowing the money and paying you the interest in return.

Checks and Payday Loans

Hispanics who were born elsewhere and moved here have something in common: Many don’t put their money in bank accounts.

Reason for this being that instead they use check-cashing stores to pay their bills. These stores charge them higher fees than any bank would. Those who came from other countries might be skeptical of banks because of their experiences with unreliable bank systems. They don’t know the consumer protections that U.S. banks offer and as a result, they often fall victim to predatory lenders.

Key Takeaways

• Having a bank account can make it easier to manage your money
• You can use your bank statements to review your monthly spending and even note recurring or unnecessary expenses.
• You can take advantage of the banks Direct depositing of checks from work, which means you don’t have to use a check-cashing store.
• Banks make money by charging interest on loans
• The Money you hold at most banks is insured up to $250,000 and you’re also carrying less cash around making you less likely to be targeted by thieves.
• And most importantly banks help undocumented immigrants build a financial footprint and establish a financial history.