What does unbanked mean?

An unbanked household has no member with a checking, savings, or other type of account at a bank or credit union. The FDIC's biennial survey estimates approximately 5.9 million US households (4.5% of all households) were unbanked as of the most recent survey. Unbanked individuals rely on cash, money orders, check cashing services, and prepaid debit cards for financial transactions — all of which typically cost more than traditional bank accounts.

What does underbanked mean?

An underbanked household has a bank account but still relies significantly on alternative financial services — like check cashing services, payday loans, money orders, or prepaid cards — for financial needs. The FDIC estimates approximately 14.9% of US households are underbanked. Being underbanked often means having access to a basic account but lacking access to affordable credit, savings products, or full banking services.

Why are people unbanked?

The most common reasons people are unbanked (FDIC survey data): 1) Don't have enough money to meet minimum balance requirements or avoid fees (cited by ~39% of unbanked households); 2) Don't trust banks (cited by ~36%); 3) Privacy concerns; 4) Bank account fees are too high; 5) Inconvenient hours or locations; 6) Don't have the required ID to open an account; 7) Previous ChexSystems negative record blocks account opening; 8) Undocumented immigration status creates barriers.

What are second-chance bank accounts?

Second-chance bank accounts are designed for people who have been denied a regular bank account due to a ChexSystems or Early Warning Services negative record (often from bounced checks, unpaid fees, or overdraft abuse). These accounts typically have no minimum balance, no overdraft, and lower fees. Providers include: Wells Fargo Clear Access Banking, Bank of America SafeBalance, Chime, Current, and many credit unions. After 12 months of good standing, most customers can upgrade to a standard account.

What are the costs of being unbanked?

Being unbanked is expensive. Alternative financial services cost the average unbanked household hundreds of dollars per year: Check cashing fees: typically 1–3% of the check amount (cashing a $1,000 paycheck at 2% = $20 fee); Money order fees: $1–$5 per transaction; Prepaid debit card fees: monthly fee of $5–$10 plus reload fees; Payday loans: average APR exceeds 300% — a $300 2-week loan typically costs $45–$60 in fees. The CFPB estimates unbanked households spend up to $900/year in fees for basic financial services that would be free or near-free with a bank account.

Why People Are Unbanked or Underbanked — And What to Do About It 2026

Why People Are Unbanked or Underbanked in 2026

Despite widespread banking access, approximately 5.9 million US households (4.5%) remain unbanked — relying entirely on cash, money orders, and check-cashing services. An additional 14.9% are underbanked, holding accounts but still using expensive alternative financial services.

Unbanked vs Underbanked: Definitions

Unbanked: No checking, savings, or other account at a bank or credit union. All financial transactions conducted in cash or through alternative services.

Underbanked: Has a bank account but relies on at least one alternative financial service (payday loans, check cashing, money orders, prepaid cards) in the past 12 months.

Source: FDIC National Survey of Unbanked and Underbanked Households, 2023.

Who Is Most Likely to Be Unbanked?

Group	Unbanked Rate
Lower-income households (under $30K)	~13%
Black households	~11%
Hispanic households	~9%
Native American households	~14%
Less than high school education	~14%
National average	~4.5%

Source: FDIC 2023 survey.

Top Reasons People Are Unbanked

FDIC survey data on why unbanked households don’t have accounts:

Not enough money to meet minimums / avoid fees (~39%) — Many accounts require $25–$100 minimum deposits and impose $10–$15/month fees if balances fall below thresholds.
Don’t trust banks (~36%) — Historical reasons: bank failures, discriminatory practices, perceived exploitation.
Privacy concerns (~18%) — Concerns about financial surveillance or government access to account data.
Previous banking problems (~16%) — ChexSystems negative record from bounced checks or unpaid fees.
ID documentation barriers (~10%) — Some people lack government-issued ID required to open accounts.
Inconvenient hours/locations (~9%)

The Cost of Being Unbanked

Alternative financial services extract significant fees:

Service	Typical Cost
Check cashing (paycheck)	1–3% of check value
Money order	$1–$5 each
Prepaid debit card	$5–$10/month + reload fees
Payday loan ($300, 2 weeks)	$45–$60 (300%+ APR)
Rent-to-own furniture/electronics	2–3x retail price over term

Annual cost estimate: The CFPB estimates unbanked households spend $400–$900/year in fees for basic financial services that would cost little or nothing with a bank account.

Solutions for the Unbanked and Underbanked

Second-Chance Bank Accounts

For those rejected by banks due to ChexSystems records:

Wells Fargo Clear Access Banking — no overdraft, $5/month fee
Bank of America SafeBalance — no overdraft, $4.95/month
Chime — no ChexSystems check, no fees, no minimums
Current — similar to Chime, designed for underserved customers
Many credit unions offer second-chance or fresh-start accounts

FDIC BankOn Program

The FDIC’s “BankOn” initiative certifies accounts that meet minimum standards: no overdraft fees, low monthly fee (max $5), no minimum balance requirements to open, and acceptance of alternative IDs. Search for certified BankOn accounts at FDIC.gov.

Alternative IDs for Account Opening

Many banks now accept:

ITIN (Individual Taxpayer Identification Number) — available regardless of immigration status
Matrícula Consular (Mexican consular ID) — accepted at many major banks
Passport (foreign or domestic)

Is My Money Safe in a Bank? — FDIC protection basics
10 Essential Banking Terms — banking vocabulary
Banking Basics Hub — complete banking guide

Written by WealthVieu

WealthVieu researches and writes data-driven personal finance guides using primary sources including the IRS, Bureau of Labor Statistics, Federal Reserve, and Census Bureau.

The content on Wealthvieu is for informational purposes only and should not be considered financial, tax, or investment advice. Consult a qualified professional before making financial decisions. Full disclaimer · Editorial policy