Imagine not being able to deposit your paycheck after a long week of work, use online payment for utility bills, check how much money you’ve saved before making a big purchase, or even withdrawing cash from an ATM — these are just a few things that people with established bank accounts take for granted, but that’s the reality for more than 14 million unbanked people in the US.
Disproportionately, African Americans are among the unbanked, with nearly 18% of African-American households in the Federal Reserve Bank of Kansas City’s district without a banking account. The district covers Kansas, Western Missouri, Oklahoma, Colorado, Nebraska and Wyoming.
Now, thanks to the availability of new “safe and secure” accounts aimed at the unbanked, the number of unbanked households is decreasing. However, there’s still plenty of work to be done.
These new “safe and secure” accounts are being promoted through a national effort led by Cities for Financial Empowerment (CFE) and supported by the Federal Deposit Insurance Corporation and the Federal Reserve Bank. The program, called Bank On, began slowly in 2015 but it’s catching steam. Initially, banks seemed reluctant to offer these low-fee accounts with low barriers to entry, but more and more banks are joining the movement with more than 200 banks across the country now offering these “safe and secure” Bank On accounts.
These accounts aren’t your typical high-fee accounts that have so often driven people away from financial institutions. To qualify as “safe and secure” the accounts must meet all of the required standards established by CFE.
Bank On Account Standards
To begin with, the fact that all Bank On accounts are insured by the FDIC is a given. Here are a few of the other basic standards all “Safe and Secure” Accounts must meet.
Offer a free debit card (e.g., Visa, Mastercard, Discover) for point-of-sale use and bill payment.
Require a minimum deposit of $25 or less to open an account.
Have a monthly maintenance fee of $5 or less if not waivable, or $10 or less if it’s waivable entirely with a single transaction (e.g. direct deposit with no minimum deposit, online bill pay, or debit card purchase).
Not charge overdraft or non-sufficient fund fees.
Not charge fees for account activation, closure, dormancy, inactivity, and low balances.
Account users must have free and unrestricted access to bank branches, and for financial institutions without branches, account holders must have access to a free ATM network and free remote deposits.
Accounts must offer free and unrestricted telephone banking, including live support.
ATM access must be free and unrestricted in the bank’s network. Out-of-network transaction fees must be $2.50 or less or up to $3 if access is also provided free to a partner ATM network.
Free cash and checks in branch and at ATM when available, and free direct deposit
Free bill pay if available, otherwise at least four free money orders and/or cashier checks per month.
Free check cashing for checks issued by that institution
Free online banking, mobile banking, and banking alerts
Free electronic monthly statements or mailed paper statements for $2 or less.
Additional Recommended Bank On Features
While Bank On core standards offer an attractive list of features, some of the unbanked have additional personal issues that keep them out of the banking system. One of those is a bad banking history. If you left a previous bank with a negative balance, you may have been told by another financial institution that you had to clear that previous balance before you could open an account at their bank.
The fact that most of these negative balances are often due to bank fees and overdraft charges, sours many people on banking. Now, with limited trust in banks, it may be difficult and frustrating for the unbanked to come up with the money to cover their previous balances. In addition, with their trust in banks diminished, they’re fearful the same thing will happen again; banks layering on charge after charge.
While not required, Bank On encourages banks to consider accepting individuals with less-than-perfect banking history, encouraging them to only deny customers who are guilty of actual fraud.
In addition, Bank On encourages banks to consider accepting alternative IDs for those who don’t have current government-issued IDs. This can be beneficial to seniors whose IDs may have expired. They also encourage banks to make available free credit-building products like a secured credit card or a secured personal loan.
Jacob Martin is a Report for America corps member based at The Community Voice covering Kansas City’s African-American community.