With the pandemic, one thing has become abundantly clear. Many Americans don’t have a bank account. As a few rounds of stimulus payments have come and gone, the FDIC has realized that it can make receiving your stimulus check easier if you have a bank account. However, the FDIC knows that too many are unbanked, and getting them their stimulus checks is challenging. How the FDIC is hoping to help the unbanked get an account to receive their money faster.
The first to receive direct deposit payments were those able to provide their current banking information. These started arriving a year ago. Unfortunately, the system came with its set of glitches. These glitches prevented many people with the accurate banking information that was on file with the IRD from getting the payments right away. While the electronic delivery of stimulus funds decreased the wait time for receiving them, many without a bank account have to wait longer. Direct deposit has proven to be faster than standard mail and prepaid debit cards, especially with the continual delays of the slower U.S. Postal Service.
For many Americans, daily financial business is being done outside the traditional banking systems. This has led many Americans to become prey for payday loan companies and even rent-to-own establishments. In the end, they end up paying more fees, most of which are unnecessary to cash their checks.
Government agencies have worked for years to encourage the economically vulnerable in America to open a bank account. While at least 95% of American households or 124 million have a credit union or bank account, this leads to a significant number still without an account and financial security.
It’s estimated that 7.1 million households don’t have access to a bank account. The most hit with this issue is lower-income populations and minorities. It’s these populations that are misrepresented when it comes to being the most unbanked. According to a report by the FDIC, 2.5% of white households, 14% of black families, and 12% of Hispanic households remain unbanked. With the continual disruptions to the economy and social structure of the country due to the pandemic, its become more essential than ever to conduct any financial business electronically safely and securely.
Right now, the pandemic has presented the FDIC with numerous challenges, especially for those households who conduct their financial transactions with traditional paper instruments. They are also factoring in that many desire or need to visit a physical branch. Many of these Americans don’t have enough savings to cushion them in case of a financial crisis or the access they need for affordable credit.
Now add the stimulus money to the equation. The FDIC is trying to reach the unbanked population. Many are unable to receive any of these federal benefits due to not filing a tax returned. Since many don’t have a bank account, when they file their returns for a payment to be sent, the IRS is stuck with mailing them a prepaid debit card or check, which can take longer than necessary.
However, there is some light at the end of the tunnel. The FDIC is trying to make it simpler for the unbanked to get their stimulus funds faster. Their awareness campaign, #GetBanked, has been designed to show the unbanked how beneficial have a bank account can be. This includes numerous financial services and credit that wouldn’t usually be available to them.
Currently, the #GetBanked campaign is running in Houston, Texas, and Atlanta, Georgia. Here, the FDIC says it can better help the significantly higher percentage of the black and Hispanic unbanked population. With more stimulus money coming in the near future, the IRS hopes that more people having bank accounts will speed up this payment process and allow people to get their money faster.
President Biden’s COVID-related aid is a sizable $1.9 trillion and includes a significant increase to the usual Child Tax Credit. This makes the 2021 tax years expansions to a $3,600 refund available for children under five and $3,000 for children six to seventeen. Payments are scheduled to be sent out this July and are in advance. This advance is approximately half of the credits parents can claim on their tax returns when they file next year. If the unbanked open bank accounts, this can mean few fees for every dollar, faster deposit for the money the IRS sends them.
The current administration seeks to ensure that all unbanked households get these significantly larger payments through direct deposit as the summertime payment schedule rolls out. However, looking at who is unbanked shows a depressing disparity. With the FDIC believing that they have to do better as many Americans are in need of this government support.
For many who don’t have a bank account, many believe they don’t have enough money to meet the minimal requirements to hold a balance or keep their account open. However, others have firmly admitted to not trusting any financial institution. Both have proven unique challenges for the FDIC as approaching each takes special care and a lot of work to gain the level of trust needed to convince many of the unbanked to open an account.
As the #GetBanked campaign starts, the FDIC is pointing toward many financial institutions to create no-cost or low-cost accounts for people. This is especially true for those in fear of higher fees and other unnecessary charges that will only add to the unbanked financial burden.
Currently, approximately seventy-five financial institutions have designed accounts for the unbanked. This has all been done under the national initiative called Bank On. With these accounts, the unbanked can create an account with $25 or less. As an added incentive, these accounts will not have overdraft fees or non-sufficient fees. However, transactions will be declined if funds won’t be available.
The pandemic has shown that there is a significant overlap between the unbanked and those eligible for stimulus money and other federal assistance. The disconnect in consumer protection how they receive their money in a fast and secure way. However, the #GetBanked initiative is moving forward along with Bank On. To help the unbanked in the process of finding a bank account that fits their needs, the FDIC website offers a search for participating financial institutions that will help the unbanked in getting the stimulus money on time and securely.