How Banks in Your Community Can Help With Financial Hardship

Opening a first savings or checking account with birthday money or a first paycheck used to be a rite of passage for most Americans. But millions of adults are just now doing that—or learning how to actually use bank accounts to improve their finances.

In 2024, 4.8 million new Bank On accounts were opened, up 27% from the year before, according to the St. Louis Federal Reserve. Bank On brings together financial institutions nationwide to offer affordable accounts to unbanked and underbanked people. By the end of last year, there were more than 14 million active accounts.

Access to basic banking helps people achieve economic stability. Without a bank account, households struggle to save, manage everyday transactions, and build relationships that lead to affordable credit.

"Cash flow is king," said Seth Schaefer, chief impact officer at Rivermark Community Credit Union.

Unbanked vs. Underbanked

Unbanked means having neither a checking nor savings account. In 2023, a record-low 4.2%—or 5.6 million households—were unbanked, according to the FDIC. That's down from 8.2% in 2011.

About 60% of the unbanked are cash-only users. This opens them up to theft or loss every day. They tend to be older, more likely Hispanic, and distrustful of banks.

The other 40% rely on prepaid cards or payment apps like Venmo or PayPal for everyday stuff like paying bills.

Underbanked is when households have an account but still use nonbank products for most financial needs. In 2023, 14.2%—or 19 million households—were underbanked.

Why People Avoid Banks

Top reasons people stay unbanked: high minimum balance requirements, mistrust of banks, and high unpredictable fees.

Banks and credit unions have worked for years to fix that. Bank On and a credit-union campaign called Backbone promote low- to no-fee accounts to bring more people into mainstream banking.

"There's a perception it's a club and you have to qualify to get in," Schaefer said. "But that's not the case."

People who bounced checks and racked up negative balances often get declined for another account or feel too discouraged to try again.

"But we let you in," said Ziquora Banks, chief impact strategy officer at Verity Credit Union. Community credit unions have more flexibility than large institutions to dig into each person's history.

How Banking Builds Wealth

According to United Way, about 42% of households are ALICE—asset-limited, income-constrained, and employed. That’s up from 32% in 2008. This includes people in poverty (13%) and the 29% who are just above the poverty line but can't afford basic needs like housing, child care, food, and transportation.

They often rely on expensive alternatives like money orders, check-cashing services, and payday loans. Options that end up costing way more money.

"These are people who need banking services," Schaefer said. "You can't buy yourself out of financial hardship."

Many people get denied for as little as a $35 overdraft owed at another bank. Financial institutions can work with those people to break that cycle. Sometimes it's setting up real-time payments so an Uber driver gets paid right away and avoids overdrafts.

"Or if someone needs to send money back home to your country, we can support that, so they don't have to use a higher-cost method like wiring money," Banks said.

Banking also makes it easier and safer to receive government benefits. The urgent need to get COVID-19 stimulus checks via direct deposit in 2020 pushed many unbanked people to open accounts. Since then, government agencies like the IRS and Social Security stopped issuing benefits by paper check, forcing millions more Americans into banking.

How Banking Helps Communities

Community banks and credit unions support not only people but also small businesses, which drives local growth.

Community banks and credit unions have more flexibility to look at individual situations. They're not just running your info through an automated system. They can actually talk to you about what happened with that $35 overdraft five years ago.

If you've been avoiding banks because of past issues or because you think you don't qualify, check out community banks and credit unions in your area. Many have Bank On certified accounts specifically designed for people getting back into banking.

Low fees. No minimum balances. Fraud protection. Access to affordable credit. Real-time payments. Those services help people manage money instead of just surviving paycheck to paycheck using expensive alternatives.

Cash-only living or relying on check-cashing services and payday loans costs more in the long run. Banking might seem intimidating, but community financial institutions are trying to change that.

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