Can you believe there are estimates that the number of Americans who have no relationship with a bank can be as high as 20 million people. Many people don’t know what CD rates are and what compound interest is and how it applies to deposit acccounts and mortgages. Current CD rates and mortgage rates are very low so depending on whether you are borrowing money or investing money rates are low.
The new account provides account holders with a debit card with full parental access.But if you walk into a traditional deposit branch, all you get are CD rates.The unbanked aren’t alone in lacking the knowledge to navigate today’s complex financial systemcustomer base and saw a problem.
That amounts to a sizable number of people who may not be earning interest, like savings account rates interest on their money or have no access to affordable loans. Even when you think you have it straight, you can incur charges you didn’t expect.
Estimates of the number of Americans who have no relationship with a bank range from 10-20 million people.A similar range of people have also been estimated to be “underbanked” which means they have bank accounts but usually conduct their financial transactions outside of main streamf inancial institutions.
The lack of participation in the banking systemis no small matter.Just as troubling, these alternative providers, unlike banks, are generally not able to help their customers.Yet it has proven difficult to get them into the systemand keep them there.
Since relying on check cashers and payday lenders costs farmore and reduces financial options, most of these consumers would be better off as customers of main stream financial institutions. According to the Consumer Federation of America, payday lenders charge an average annual percentage rate of 470 percent on their loans.
A fast food restaurant gives you prices right away.Some pay nothing orminimal fees for an unlimited checking account, while others pay significant fees just to cash their paychecks and purchasemoney orders to pay bills.Banks can inadvertently contribute to the problem isconfusing fees.
Inconvenient branch locations and expensive and unexpected overdraft charges are among themany factors that can drive customers away especially younger people were not coming to the banks in significant numbers bad both for the banks and for those potential young customers who were missing out on what the banking industry could offer them.
Part of the problemis that many people lack the financial skills needed to analyze and compare products and their prices.These consumersmost often turn to alternative providers such as check-cashing companies and payday lenders, whose services cost farmore than those of banks.
A banking relationship would increase their chances of one day buying homes, sending their children to college and contributing to the prosperity of their communities.A similar range of of participation in the banking systemis no smallmatter.
Some pay 18 percent for a line of credit linked to their checking account; others pay 500 to 600 percent for a payday loan, which isn’t out of this world.