Consumers Shifting Away From Banks
By Consumers Union on Friday, September 14th, 2012
According to a recent Wall Street Journal article
Middle-class Americans are spending less time in the bank lobbies their parents would recognize. Today, 8.2% of the nation’s households—nearly 12 million—are managing their finances without a bank, according to Census-based data the Federal Deposit Insurance Corp. will make public Wednesday. That is up from the 7.7% the bank regulator found in its 2009 report.
Another 24 million households, defined by the government as “underbanked,” have a bank account but still dabble outside of the formal banking system by using payday loans, prepaid cards and other alternative means, the FDIC found. This population that has left banks, or uses their services infrequently, makes up 28.3% of America’s households, the agency says. That is a slight increase from the 25.6% who fit into those categories in 2009.
In our report Trapped at the Bank: Removing Obstacles To Consumer Choice In Banking we highlighted the barriers to consumer choice when shopping around for the best bank. One apparent result has been a higher number of consumers turning to prepaid debit cards and payday loans. These products had traditionally been used by lower income consumers but now the median income for prepaid customers is about $45,000, or nearly double what it was seven years ago. The average income of Cash Advance Centers Inc. customers, one of the country’s largest payday lenders, rose $9,000 to $50,000 in the first quarter of 2010. According to the WSJ, in 2011 it jumped again to about $54,000.
In April, we published Prepaid Cards: Loaded with Fees, Weak on Protections that highlights the need for adequate consumer protections in regards to prepaid cards.