Unbanked: The advantages of having a primary financial institution

For some people, storing money in a bank or credit union is second nature. Others, not so much. The idea of being unbanked refers to those who do not have a checking or savings account at a bank or credit union. According to data from the FDIC, 4.5 percent of U.S households  were unbanked in 2021.

Despite there being so many banks and credit unions spread across the country, many choose not to use them or don't have the resources or education on the benefits of using a primary financial institution. Instead of banks or credit unions, these individuals may use alternative ways, such as prepaid cards, online payment services like PayPal, Venmo or Zelle, cash, or other nonbank alternatives to complete their financial needs. While these resources may get the job done when paying bills or funding your basic needs, there are still many benefits to having at least some of your money in a bank or credit union.

Why are people unbanked?

There are many reasons people could be unbanked, some out of a person's control and others by choice. For example, some people are unbanked due to being flagged from a not-so-great financial background. However, even if that is the case, some financial institutions are designing programs to help those who this might affect.

Other reasons could be one of the following:

1. Lack of trust in the banking system: Many people don't trust banks. Whether because of stories about banks promoting unnecessary products or news of banks closing down, people would rather keep their money in their own hands than hand it over. If this is the case, know that there are regulations to keep the banks in check, such as the Consumer Financial Protection Bureau (CFPB), and government insurers, such as the NCUA for credit unions and FDIC for banks, to protect your deposits up to 250k
2. Minimum balance requirements and fees: While some banks and credit unions have minimum balance requirements or fees, not all do, or some have very small. For example, Alliant's High Yield Savings Account, the minimum balance to keep your account open is $5.
3. Age: Many young people don't have bank accounts. They may not see the value in bank accounts; however, opening an account shows that you can make smart financial decisions, leading to more options, such as better loans or lines of credit, later in life. It is never too late to start if you are above 18 and have yet to open an account. If you are a parent or guardian, there are products like kids savings accounts or teen checking accounts that can help your child get started in banking seamlessly.

What are the benefits of using a bank or credit union

If you are unbanked and interested in opening an account at a bank or credit union, it is important to research what is important to you as an individual. Some banks or credit unions are fully digital, like Alliant, while others have in-person branches where you can go to complete your banking needs. Before choosing a bank or credit union, it is also important to research things like interest rates, credit card options, minimum requirements, perks, etc. before making your decision.

Having a primary financial institution, whether that’s a bank or credit union, to store your money, save and invest can help enhance your financial portfolio. Many banks and credit unions offer much more than savings and checking accounts, such as credit and debit cards, car loans, mortgages and certificates (also known as CD’s). Putting your money into a financial institution can help you grow your money through interest or build better credit through credit cards. It can also simplify making payments on loans and mortgages if you use the same financial institution.

Make the switch from unbanked to banked today

Many people have opinions about banking and whether it is best for them. While there are many benefits to putting your money into a bank or credit union, there is no need to jump right in and sign up for an account. Think about your financial goals and make decisions based on what you want your financial future to look like. Find a bank or credit union that will help make those plans a reality through the resources they provide.

Read more about banking tips:

• Why the decision to transfer from a big bank to a credit union is simple
• How credit unions help members plan and achieve saving goals
• Finding financial fees – and how to avoid them