Who is unbanked, and why: results from a large, new survey of low- and moderate-income individuals

This paper uses data from a new, large survey to estimate the demand for financial services of low-and-moderate income households. We show that socio-economic characteristics have significant and importantly different effects on the choices about which bank accounts to have. In particular, racial and ethnic minorities were less likely to have checking accounts than whites were, but were more likely to have savings accounts. Our estimates could be used to support Caskey’s recommendation that efforts to reach LMI individuals should focus on savings accounts. Caskey’s view that managing a checking account is particularly difficult (and likely very costly) for the very poor is consonant with our findings that those with less income, education, and wealth are more likely to own a savings account than a checking account. We also provide evidence that, in addition to individuals’ characteristics, neighborhood characteristics significantly affected whether individuals were unbanked. Our estimates showed that everyone living in neighborhoods with higher proportions of racial or ethnic minorities was less likely to have any bank account and that the likelihood of owning a checking account was particularly reduced by neighborhood effects.