Living without a bank account is becoming harder and harder in today’s society.
Jay Zagorsky, clinical associate professor of markets, public policy, and law at the Questrom School of Business at Boston University, tells us why.
Jay Zagorsky is an economist who teaches at Boston University’s Questrom School of Business. This summer he taught his 10,000th Boston University student. Professor Zagorsky has published three books and is working on his fourth entitled “The Power of Cash: Why Using Paper Money Is Good For You and Society.” This is his sixth piece on “The Academic Minute.”
Living Without a Bank Account
Is it possible today to live without a bank account? This question is becoming increasingly important as more businesses are refusing to take cash. This refusal shuts out people without a credit cards, debit cards or mobile payments.
The Federal Deposit Insurance Corporation, or FDIC, periodically surveys US households about their connections to the banking system. The latest data show over 15 million people are living in households with no connections and 48 million more people are living in households with only a tenuous connection.
Combining the two figures means roughly one out of every five people in the U.S. has little or no formal connection to financial institutions. The true number of people without a bank account is likely higher since the FDIC survey misses most homeless people, transients without a permanent address and illegal immigrants.
Why don’t people have bank accounts? The top reason was not having “enough money to meet minimum balance requirements.” The second and third reasons people gave were they “avoided banks to get more privacy” and “Didn’t trust banks.”
The World Bank has created similar estimates for all other countries. Its data show about one-quarter of the world’s adults do not have access to a bank or mobile phone account. Places with the least access are concentrated in the Middle East and North Africa.
The next time you see a sign in a shop or restaurant window stating “No Cash Accepted” you are really looking at a business excluding many unbanked and underbanked people. Insisting all businesses accept cash as well as credit cards, debit cards and mobile payments is a simple way to ensure everyone is financially included in the modern economy.
