The New Haven Register
By: Brian Charles,
January 11, 2014
More than 6,000 households in New Haven are unbanked, nearly double the national average.
Instead of relying on traditional banks to cash checks and hold money, one in seven New Haven households uses check-cashing stores, according to Bank On, which advocates for the banking needs of low-income communities.
"Whole groups of people grow up in families without a relationship with a traditional bank," said John DeStefano Jr., former mayor of New Haven and now vice president at Start Community Bank. "My intuitive sense is they don't gravitate toward traditional banks because that is not their tradition of banking,"
The unbanked, as adults without checking accounts are called by economists and bankers, remain so due to myriad factors.
The unbanked largely are uneducated: more than 60 percent of unbanked households include one adult without a high school diploma; 94 percent include one adult without a college degree. The unbanked tend to work in low-income jobs, according to a study on the unbanked by the Brookings Institution.
The unbanked often don't feel they need a bank because they don't write many checks; some feel they don't have enough money to open an account, and others think bank fees are too high, according to Brookings. Access is not a problem: 90 percent of the non-traditional banks, check cashing, pawn shops and payday loan centers are within a mile of a traditional bank, according to the Institution.
Thomas Boyd, a 23-year-old Yale cafeteria worker, is among New Haven's unbanked. He cashes his paychecks at a check-cashing store on Chapel Street every two weeks.
"It's easy and fast," he said. "When I need to get my money, I go to a check-cashing place."
Check cashing is so easy that Boyd has never bothered to set up a checking account.
"I just never got around to setting it up," he said.
Boyd pays 2 percent of the value of his paycheck to the check-cashing store. It costs him a couple of dollars each check. But if Boyd never set up a checking account, it would cost him thousands of dollars.
During a lifetime, a full-time unbanked worker can pay more than $40,000 in check-cashing fees, according to the Brookings Institution.
"Lack of banking underscores a broader financial literacy challenge," said the Rev. James Manship, pastor of St. Rose of Lima Church in New Haven.
Manship has long been an advocate for the immigrant community, a population which both he and DeStefano say doesn't make enough use of traditional banks.
"We still have people getting paid and cashing their checks, and sending large portions of the money to their families in their countries," Manship said. "The money they do keep is subsistence money to pay rent and pay for food."
The issue has been the habits, but that is beginning to change.
St. Rose of Lima Church began a financial literacy class before Christmas. Four-dozen families, mostly immigrants, showed up to learn about the benefits of banking.
"People in the immigrant community are awakening to the cost of college, and seeking financial literacy and trying to understand banking," Manship said.
Reaching the immigrant community has been a challenge for those promoting use of traditional banks -- some immigrants don't speak the language, others are undocumented.
New Haven issued the Elm City Resident Card in 2007. Undocumented immigrants can use the card as identification when opening a bank account.
But still, 20 percent of New Haven households are under-banked, meaning they have a bank account that is rarely used and maintains a minimal balance.
"Meaningful metrics are not opening accounts, meaningful metrics are using accounts," DeStefano said.