Older Americans Dominate Unbanked Households

December 6, 2010

When discussing the unbanked and underserved, we tend to speak in generalities. We know, for example, that in 2009 the FDIC found that nearly 26 million Americans either had no bank accounts, or they did but still relied on non-bank financial services providers, like check cashing houses. And we know that large numbers of these Americans are poor and people of color.

Now, a newly released report reveals that the lion's share of America's unbanked are 45 or older, which puts them at a point in life when they should be thinking and planning for retirement.

The report - A Portrait of Older Unbanked and Underbanked Consumers, funded by the AARP Foundation - describes how 16.5 million Americans aged 45 and older live in unbanked households, and that African-Americans and Hispanics are overrepresented in this segment of the population.

The reasons many of these folks gave for not having checking or other types of bank accounts were purely financial; most said they just didn't have enough money to justify the cost of keeping it in a bank account.

"Lack of access to banking services makes it incredibly difficult for many older Americans to manage their moneyu and save for retirement," said Susan Reinhard, Senior Vice President for Public Policy at AARP. (The AARP Foundation is AARP's charitable arm and focuses on programs that help to empower older and low-income Americans.)

A Portrait of Older Unbanked and Underbanked Consumers was released in September. It was developed in collaboration with the Center for Financial Services Innovation (CFSI), and draws on data collected by CFSI in 2008 and the FDIC in 2009.

Here are a few additional findings described in the report.

• More than half (52%) of older unbanked Americans say they prefer using banks and credit unions.
• Nearly a quarter (24%) of unbanked and underbanked older Americans have had an auto title loan
• Nearly a fifth (18%) of the unbanked/underbanked have taken cash advances on credit cards

The report, available on the AARP Web site, urges policymakers to do more to help bank the unbanked and underserved, especially given the preference many of these Americans have for using regulated financial institutions. And it calls on banks and credit unions to offer more product/service options that meet the needs of this segment of the population, such as introductory credit-building accounts.

It also argues for additional government funding for Community Development Financial Institutions (CDFIs) to develop products and services that can help bank the unbanked.

"Lower income Americans are concerned about being able to meet their basic housing and financial needs in retirement, said Jo Ann Jenkins, AARP Foundation President."Getting them banked gives them greater ability to access financial services that can help keep them economically secure in retirement."

Americans purchase $75 billion a year in money orders from non-banks

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