Banking on America
Friday, August 21, 2009
Authored by Nabeel Gillani
According to a recent story by the AP, nearly 10,000 new bank branches were opened throughout the U.S. in the past five years (1). However, only 1 out of every 10 of these branches was opened in an inner city neighborhood. Instead of focusing on low-income neighborhoods, most banks gravitate towards middle to high-income areas, undoubtedly because they assume the risk of banking to higher income individuals is significantly less. At the same time, when banks do offer their services to lower-income customers, they tend to charge them the most for overdraft and other fees. In fact, in 2008 banks made a record $38.5 billion from overdraft fees, however “the most cash-strapped customers are the hardest hit by such fees, with 90 per cent of overdraft revenues coming from 10 per cent of the 130m checking accounts in the US.” (2) Given a paradigm in which lower-income populations lack access to the benefits of the banking system—and even when they do gain that access, they face high fees—it isn’t surprising that these population mistrust the banking sector. The result is a system that effectively shuts out millions of Americans from accessing mainstream financial services—and inhibits many more from taking the steps they need to raise their standards of living.
