U.S. Lags Behind G-7 in Bank Accounts as Poor Can’t Build Assets
Wednesday, November 12, 2014
Marissa Austin Tobin has lived most of her 37 years without a bank account.
“I was irresponsible,” said Austin Tobin, who lives in Louisville, Kentucky. “I would pay my bills, but I would just spend the rest of my money.”
She needed to establish a financial history to qualify for a loan to start a catering business, so Austin Tobin opened accounts this year under a “Fresh Start” banking program that aims to help those who had mismanaged finances. Her savings, while still limited at about $500, are growing.
That’s not the case for some lower-income households as the world’s largest economy lags behind other developed nations in banking participation. The share of the U.S. population 25 and older with a savings or checking account was 91 percent in 2011, lower than any other Group of Seven nation except Italy, based on the latest available World Bank data. That compares with 98 percent in Canada and the U.K. and 99 percent in Australia.
A less inclusive financial system cuts into people’s ability to prove creditworthiness and build assets, making it more difficult for households to get ahead. The costs of alternatives, including check-cashing operators, payday lenders and nonbank money-order suppliers, often borne by those without accounts, also exacerbate wealth inequality.