There are approximately fifty thousand households in the United States who do not use banks. Many of these unbanked households are comprised of low-income, minority families that see no need to open a bank account. The reasons these households are hesitant to use banks are many, but several studies have been conducted by financial institutions that pinpoint factors contributing to minority’s reluctance to maintain a bank account. Though their findings reflect trends in the general minority population, they also have relevance to Asian Pacific Islander families who choose not to use banks.
Like many other minority populations, APIs do not open bank accounts for several reasons. Perhaps the most significant factor is that unbanked APIs do not trust banking institutions. Jerry Degriek, Public Health Manager and Policy Advisor of Bank on Seattle King County, states: “They might have had bad experiences with banks in their home countries, they may have bad experiences in banks currently, and they may have felt that they were charged inappropriately. We should also consider hidden fees and cultural reasons such as language barriers.”
Enter Bank on Seattle King County, one of many initiatives across the country that serves to educate the unbanked on the advantages of opening a bank account, in addition to removing some of the barriers that hinder people from using banks.
According to Degriek, organizations such as Bank on Seattle promote “tighter restrictions on what financial institutions can or cannot do. In the past people were driven by institutions to have overdraft protection . . . There are new regulations that people have to specifically opt into overdraft.“
Education is a primary way for organizations such as Bank on Seattle to engage unbanked populations. For APIs, Degriek notes several credit unions such as Cathay Bank and Union Bank that can help APIs with setting up an account and financial planning. Joyce Saldanha, of International District Housing Alliance, elaborates on how her organization (working closely with Bank on Seattle) helps unbanked populations achieve financial success: “We provide eight hours of extensive education. Participants who complete this education will be provided a certificate through Bank on Seattle King County . . . Those clients who complete these eight hours can go to banks in King County and open an account even if they have damaged their credit. “
So what precisely are the advantages of opening and maintaining a bank account? Most unbanked populations do not see a need to manage their finances on a long-term basis, resulting in very little to no credit history. Regarding the benefits of opening a bank account, Saldanha says, “They can build their credit report, maintain good credit history, obtain a low interest rate if they want to buy a car or mortgage a loan, achieve better financial planning and learn how to use resources available for them.”
Education through organizations such as Bank on Seattle and IDHA also alerts the unbanked on the drawbacks and potential dangers of not having a bank account. In addition to having little credit history, people without bank accounts risk theft resulting from unsecured cash. Degriek states, “People are likely to spend more than they need to. Having a basic banking relationship is a starting point that people need to meet their financial goals. If they want to have affordable credit, they need to establish a relationship.”
Slowly but surely, initiatives such as Bank on Seattle and IDHA are providing low-income APIs (and other minorities) a chance to enjoy the benefits of maintaining a bank account. The education people receive at these organizations is transformative, and at times, life-changing. Mark Modica, who had been an alcoholic before attending the classes held by Bank on Seattle King County, recollects: “I got sober, and decided to turn my life around . . . [The experience] was incredible because it prepared you for the workplace, to have confidence and wherewithal to go before your employer.” As a result of his experiences at Bank on America, Modica now maintains a steady job at Auburn Chevrolet and has changed his life for the better.
The problem of unbanked minority populations is a symptom of a larger dilemma afflicting American society today – chronic poverty in large urban populations. Programs like Bank on Seattle help to ease the burden of poor minority groups (including APIs) and educate them on the benefits of financial planning. As more initiatives are passed that directly address the needs of the unbanked poor, a foundation can be laid for promoting financial success and positive life-direction.