Why Are So Many Americans Unbanked?

While working as a teller at a check cashing business, Lisa J. Servon was surprised to learn why its customers preferred it over commercial banks:

The primary critique of check cashers is that they are expensive. Sitting in my New School office eight miles south of Mott Haven, I had believed that, too. When I interviewed my customers, however, I learned that for many lower income people, commercial banks are ultimately more expensive. The rapidly increasing cost of bounced checked fees and late payment penalties has driven many customers away from banks, particularly those who live close to the edge, like many of my RiteCheck customers. A single overdraft can result in cascading bad checks and hundreds of dollars in charges.

She goes on to argue that the “banking industry needs to develop different fee and service structures designed to accommodate lower income depositors in much the same way banks currently provide VIP treatment to high-net-worth individuals.”