Unfortunately, too many — one in four people nationally, according to the Federal Deposit Insurance Corporation (FDIC) —live outside the financial mainstream because they cannot afford bank accounts or do not trust banks. When you break it down by race, it is one in five white households compared to an alarming almost one out of every two African American households.
Just over seven million households are considered “unbanked.”
In Minnesota, nearly 40% of all households of color are unbanked or underbanked compared to one in ten white households, a disparity that, over the course of a financial lifetime, can cost someone without a bank account nearly $40,000 in fees.
African American, Hispanic, indigenous and/or customers of color who are banked are often charged higher minimum balances and higher fees to maintain basic bank accounts. For example, the average combination of costs and fees for a basic, entry-level checking account is $190.09 higher for African American customers and $262.09 higher for Hispanic customers than it is for white customers.
Prepare + Prosper offers FAIR Banking, short for Financial Access in Reach, to help un- and under-banked individuals obtain affordable checking and savings accounts that provide, in addition to no overdraft fees, more transparency, trust, inclusion, access and partnership.
Prepare + Prosper Programs and Strategy Director Claudia Holt said expensive accounts and reports from ChexSystems, which reports unpaid fees and overdrafts, are barriers for clients.
“Overdraft and other fees can add up quickly and once the damage is done it can be hard for people to recover,” said Holt. “And FAIR says everyone deserves access to safe and affordable banking options.”
Holt added that FAIR does not require monthly minimum balances, another barrier to maintaining a bank account.
Shaquonna Jackson began her journey with Prepare + Prosper as a customer, utilizing the nonprofit’s free tax preparation services and eventually signing up for FAIR. Jackson became part of Prepare + Prospers’ Community Ambassador pilot program. FAIR hired four current FAIR customers to promote the program in their communities and networks, including offering FAIR enrollment at several local libraries.
Before joining FAIR, Jackson grappled with maintaining her bank account at a large financial institution.
“They were no longer willing to bank with me because I got behind on fees,” Jackson said.
She added that the mistrust of financial systems could dissuade people from opening an account. However, she said her positive experience with FAIR is a helpful recruiting tool.
“I think the number one issue is trust, you know. A lot of folks have not had good experiences with past banking, so they’re like, ‘Why should I try FAIR?’ But once I give them my story, because I’m speaking from experience, that carries more levels to it,” she said.
Prepare + Prosper also offers Money Mentors, a free financial coaching program that works with customers longer-term to help them reach a financial goal as well as free tax preparation throughout the Twin Cities. Find more information on Prepare + Prosper and their free tax preparation here.