Not Everyone Has a Bank Account: The Cost of Being Unbanked

Experts say it's safer to hold your money in a financial institution, but in 2019, approximately 6% of adults living in the U.S. were unbanked — meaning they did not have a checking, savings or money market account. In Boston, around 10% of households are currently unbanked

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When Andrew Ramsay came home after serving 28 years in federal prison, he was excited to move on with his life. However, Ramsay — who was granted a compassionate release last year after being convicted of murder in aid of racketeering when he was 18 — was met with resistance.

"There was no help for me as an individual who was coming home from incarceration," he said.

Of the many things Ramsay had to do once he re-entered society, he said, getting a bank account was among the most difficult. Many banks require official documentation — like a driver’s license — to open an account. After being incarcerated for more than half of his life, Ramsay only had a prison ID at the time of his release.

"If you come home from being incarcerated, and you don’t have any kind of identification, what can you do?" Ramsay said.

Ramsay, who now lives in West Haven, Connecticut, eventually got his own bank account, started a construction job and found a path to financial wellness. He says, only with the help of nonprofits Emerge, which assists formerly incarcerated people, and Bank On Connecticut, which helps people find affordable banking.

In partnership with the Justice Media Computational Journalism co-Lab at Boston University, NBC Boston examined how people across the city of Boston struggle to connect with financial institutions.

In 2019, approximately 6% of adults living in the U.S. were unbanked — meaning they did not have a checking, savings or money market account — according to the Federal Reserve Report on the Economic Well-Being of U.S. Households from that year.

The same year, 16% of people 18 and older in the U.S. were underbanked, which means they had a bank account but used alternative financial services, like check-cashing facilities.

Every two years, the Federal Deposit Insurance Corporation distributes its own survey to a sample of households representing the U.S. population. In 2019 it found minimum balance requirements and a lack of trust in banks were the leading explanations for why people avoided them.

Michael D. Andelman, program manager for Bank On Boston, part of a national coalition of organizations that collaborate with municipalities and communities, including the Mayor’s Office of Financial Empowerment, said the organization encourages people to use financial institutions.

“It’s safer to have money in a financial institution than to have it on one’s person,” Andelman said.

In Boston alone, around 10% of households are currently unbanked and another 20% are considered underbanked, according to the Mayor’s Office of Financial Empowerment. This can put them at an economic disadvantage, limiting access to other useful services like ATM cards, credit cards, lines of credit, and other services.

Amanda Cordero, who doesn’t have a bank account, said she thinks the convenience of check cashers outweighs the cost.

"I come here because it’s quicker," Cordero said. "It’s easier."

There can be many costs associated with having a bank account. In 2019, 34.2% of unbanked households were concerned about fees, the FDIC survey showed. That same year, banks with assets of $1 billion or more charged customers $11.68 billion in overdraft-related fees, according to a report by the Center for Responsible Lending.

In recent years, many banks — including Bank of America, Capital One and JPMorgan Chase — have eliminated or reduced their fees.

Andrew Ramsay served 28 years in federal prison and when he came home and reentered society, he said it was very difficult to get a bank account.

The FDIC has yet to finalize its 2021 survey and denied a public records request to provide statistics about the data. Andelman is hopeful the number of unbanked households will continue to decrease in the next survey because of fee elimination and bank expansion.

“When I started with Bank On Boston, there was one financial institution that was offering a Bank On ‘Certified Account.’Now there are eight,” he said. “The playing field is getting a little bit more level.”

For more information about Bank On Boston, click here.

To produce this story, NBC Boston partnered with Boston University’s Justice Media Computational Journalism co-Lab, a collaboration between the Faculty of Computing & Data Sciences’ BU Spark! program, the College of Communication, and the BU Hub Cross-College Challenge. Contributing students were Jeremy Ahdoot, Melissa Ellin, Aanchal Gupta, Kyle Kamali, Gagan Kang, and Yefei Yao with assistance from professors Osama Alshaykh and Brooke Williams.

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