Increased Numbers of Americans Thriving Outside the US Banking System
Instead, they rely on alternate means of cashing checks and utilize pre-paid debit cards to help manage their finances.
According to a new report from the Federal Deposit Insurance Corp. (FDIC) these Americans are more vulnerable to higher bank fees & interest rates while also being cut off from credit to buy a car, buy a home and obtain a college loan as well.
Released Wednesday, this particular study shows that 821,000 households either opted or were forced out of the banking system from 2009 to 2011 and that the so-called "unbanked" population grew to 8.2 percent of U.S. households.
According to these former Bank of America customers, these erroneous penalties and fees can exceed $500 in any given month and the bank freezes their customers' funds while they claim to be looking into these matters. Sometimes the fees are reversed, sometimes they're not and other times the funds are only partially refunded after long periods of time. Sometimes, these unexpected erroneous penalties and fees often times cause regularly occurring charges to bounce making damages become exponentially worse.
In this economy, household finances can run very tight. It's often difficult for many account holders to undergo these unexpected charges and worse, have their business's or family's funds frozen indefinitely. This alleged behavior on behalf of banks like Bank of America is forcing their customers to close their accounts and to live outside the banking system as reflected by Wednesday's report. And what's worse is there's no effective oversight or remedy.
It may be inconvenient for individuals, families or even businesses to live outside the banking system - but a savings of $500 in erroneous fees combined with the many savings from avoiding all the costly penalties and regular fees banks love to charge - living outside the banking system can often be extremely beneficial.
More Statistics From Wednesday's FDIC Report:
The report also indicates that extremely high unemployment and underemployment has placed millions of Americans in financial positions where if they did have enough funds to keep open bank accounts - they would not be able to afforD to "absorb" regularly occurring overdraft charges or minimum-balance fees.
Banks' recent inability to generate their desired profit levels that Wells Fargo, Capital One and SunTrust have alerted customers to pending fee hikes on checking accounts or have raised overdraft charges. These banks are not losing money, they're in-fact generating enormous profits. However, they've decided that they're not making as much as they wish, so they're increasing overdraft charges along with checking account fees.
Banks also add that they find it difficult to make money serving lower-income communities because the cost of managing their accounts outweighs the return.
Further Comments From Bank Regulators Regarding Wednesday's Report
“There has to be a recognition that there are costs to providing accounts and those costs have to be covered,” said Nessa Feddis, vice president and general counsel at the American Bankers Association. She estimated that it costs banks up to $300 a year to maintain a checking account because of expenses such as processing transactions.
National Community Reinvestment Coalition chief executive John Taylor argued that banks could make up some of that cost by the sheer volume of new accounts.
Feddis disagreed. “You can’t take a losing account and make it up in bulk,” she said. “You’re not going to spend money to lose money.”
Without access to traditional banks, Taylor said, Americans are susceptible to abusive practices at non-bank institutions and are likely to remain trapped in a vicious cycle of financial strain.
With the above being stated for the record, it's important to take not of the record profits posted by US banks over the last several years. Many bank executives are enjoying record bonuses for their role in all the success and profitability they all helped to their respective institutions to earn.
Many readers are looking forward to the reports that indicate that all the US stimulus money these banks received has been repaid in full.