In the News

10 percent of Tennessee families don’t have bank accounts

By Naomi Snyder
December 3, 2009

One of every 10 Tennessee households doesn't have a bank or credit union account, and those going without are more likely to be minority and low-income consumers, according to a report published Wednesday by the Federal Deposit Insurance Corp.

The federal banking regulator found that about one-third of all African-Americans in the state don't have a bank account — a higher percentage than the national average for that group, which was 22 percent.

More Tennesseans overall go without a bank account than the national average of 7.7 percent.

Barry Matthews, vice president of community relations and business development for First State Bank in Union City, said lower educational attainment and lower incomes are among likely factors in the state's higher-than-average rates.

The FDIC survey found that households with no bank accounts tend to make less than $30,000 per year and don't have anyone with a high school diploma.

Fully 31 percent of the households headed by women in the state don't have a bank account, according to the survey.

Other factors, including a lack of trust of banks, also can come into play.

"Sometimes it's cultural issues; sometimes people don't trust banking relationships,'' Matthews said. "Maybe it is something passed down generation to generation, or maybe it's personal experience."

Some lower-income consumers prefer payday lenders despite what can be high fees assessed there.

"When people go to a payday lender, they're charged a flat fee and they know it when they go in. They look at the simplicity of it," Matthews said. "They may perceive the relationship with the bank as more complicated."

Rachel Freeze, manager of the United Way's Nashville Alliance for Financial Independence, which helps people with free budget planning and tax preparation, said many times, people are simply shut out of banks.

Some are essentially blacklisted after not paying their bills or they don't have enough money to maintain a minimum account balance and avoid overdraft charges, Freeze said.

"Once you've been burned by overdraft fees, you don't forget it," she said.

Freeze said going without a bank account often costs consumers quite a bit more money. Paying for four check-cashing services and four money orders a month can easily cost $547 per year, about two weeks' pay for the minimum-wage worker, she said. First State Bank is an example of an institution that introduced a "second-chance" account about two years ago aimed at people who didn't have a bank account.

It has no maintenance fees, checks or debit cards, and it waives ATM fees, even at competing bank ATM machines. After 90 days, the customer can move into a regular bank account and get a debit card and checks.

"We don't want to throw them in the pond to sink or swim,'' Matthews said. "We want them to learn about that as they go."

The Census Bureau conducted the survey of 54,000 households in January on behalf of the FDIC. FDIC Chairman Sheila Bair said better access to bank accounts would give households "an important first step toward achieving financial security."

Vulnerable families would be better able to save for emergencies and borrow on more affordable terms, Bair said.

Article by The Tennessean. ::Link:: to story at




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