The term "underbanked" typically refers to individuals or households that have limited or no access to traditional banking services. This can include people who do not have a bank account, or those who have a bank account but also use alternative financial services (AFS) such as payday loans, check cashing services, or money orders.
There are a variety of reasons why someone might be underbanked. They may not have enough money to meet the minimum balance requirements of a traditional bank account, or they may not have a steady income that would allow them to qualify for a credit card or loan. They may also live in an underserved community where there are no banks or credit unions, or they may simply not trust banks.
According to the FDIC, approximately 8.4 million households in the United States are underbanked. This represents about 6.5% of all households. How many US households are underbanked? According to the FDIC, approximately 8.4 million households in the United States are underbanked. This means that they have a bank account but also use alternative financial services, such as payday loans, money orders, or pawn shops.
Why are people unbanked or underbanked? There are many reasons why people are unbanked or underbanked. Some people may not have a bank account because they cannot afford the fees, or they may not have enough money to keep in an account. Others may not have a bank account because they do not have a valid form of identification, or they may not have a permanent address. Still others may not trust banks, or may not have access to banking services.
Why is being underbanked a problem? There are a number of reasons why being underbanked can be a problem. First, underbanked individuals may have difficulty accessing credit. This can make it difficult to start or grow a business, or to finance a major purchase. Second, underbanked individuals may have difficulty accessing basic banking services. This can make it difficult to save money, or to manage one's finances effectively. Finally, underbanked individuals may be at a greater risk of financial exploitation. This can make them more vulnerable to scams, or to being taken advantage of financially.
What are some banking terms? Asset: Something that has economic value and can be converted into cash (i.e. a house, a car, a bond, etc.).
Liability: A financial obligation or debt (i.e. a mortgage, a credit card balance, a student loan, etc.).
Equity: The portion of ownership that a shareholder or partner has in a company (i.e. the portion of the company's assets that are owned by the shareholder or partner).
Deposit: Money that is placed into a bank account.
Withdrawal: Money that is taken out of a bank account.
Interest: The fee charged by a lender for the use of their money, or the rate of return earned on an investment.
Principal: The amount of money borrowed or invested, not including interest.
Loan: A sum of money that is borrowed and must be repaid with interest.
Mortgage: A loan that is used to purchase a property. The property is used as collateral for the loan, and if the borrower defaults on the loan, the lender can foreclose on the property.
Credit: An arrangement in which a borrower receives money, goods, or services in advance of payment, with the understanding that they will repay the debt with interest.
Debit: An accounting entry that represents an outgoing flow of cash or other assets.
Balance: The difference between the credit and debit amounts in an account.
How much money is unbanked? According to the World Bank, an estimated 1.7 billion adults globally are unbanked – that is, they do not have a bank account. This number has remained relatively unchanged over the past decade, despite the continued growth of the global economy and the proliferation of digital banking technologies.
There are a number of reasons why someone may be unbanked, but the most common reason is simply that they cannot afford to open and maintain a bank account. This is especially true in developing countries, where the average cost of opening and maintaining a bank account can be prohibitively expensive.
Other reasons for being unbanked include not having enough money to meet the minimum balance requirements, not having a government-issued ID, or not having a formal address. In some cases, people may simply not trust banks or may not have access to a banking institution.
The exact amount of money that is unbanked is difficult to estimate, but it is likely in the trillions of dollars. This money is typically held in cash, which can be difficult to save and can be lost or stolen easily. For many people, being unbanked means a life of financial insecurity and limited opportunities.