Low-income consumers are dropping their bank accounts in droves and bank fees are to blame, a recent study from the Pew Health Group found.Even worse, the rate of households going bank-less has surpassed the number opening new accounts.
The organisation tracked 2,000 low-income California families — half with bank accounts, half without —over the course of a year to figure out why some decided to ditch their banks in favour of alternative means of storing their cash.
More than one-third of the participants in the two-part study blamed bank fees, while another 27 per cent said they left their banks due to job loss and low cash flow.
Minimum balance requirements deterred more than half of respondents, who said they couldn’t meet the requirement to open an account in the first place.
Getting consumers to open bank accounts is only half the battle, the organisation reported. Low-income families face even greater obstacles when it comes to maintaining their accounts.
Banking is instrumental in helping families save for long-term goals like funding college education, Pew said. More than two-thirds of families that banked were contributing to savings accounts at the same time, despite obstacles like job loss and lowered income.
By comparison, a paltry 9 per cent of unbanked households were able to save.
The analysis provided some insight into another recent Pew study that looked at which states were least likely to bank. Mississippi topped the list.