Washington, DC - At an event today in California, The Pew Charitable Trusts' Safe Banking Opportunities Project joined Governor Arnold Schwarzenegger, California mayors and banking officials in announcing a new statewide program to bring more of the state's residents into the financial mainstream. The state's “Bank On” initiative aims to connect the “unbanked”—households without bank accounts—to appropriate, more affordable accounts that help lower their financial transaction costs and put them on the path to building savings and assets.
Pew's Safe Banking Opportunities Project predicts that California's Bank On initiative will save over $100 million for moderate- and low-income households within two years if the goals of the initiative are met.
“Pew is honored to work with Governor Schwarzenegger and mayors from across the state to bring working Californians without bank accounts into the financial mainstream,” said Rebecca W. Rimel, president and CEO of The Pew Charitable Trusts. “Bank On California will help many families save money by accessing basic financial services with lower fees others may take for granted. This is the largest effort of its kind and is an excellent model for states across the country.”
A Pew report released at the event—Converting Basic Financial Services Fees into Prosperity: An Untapped Wealth-Building Opportunity for Banks and Consumers—found that 12 percent of California households lack a bank account and pay fees to cash checks and pay bills, adding up to $700 annually for the typical unbanked household. The majority of these households appears to be qualified for bank accounts, but is either misinformed about the relative cost of banks or distrustful of them.
Nationwide, households spend over $50 billion annually on fees tied to basic financial services, like overdraft charges and credit card late fees. In California, about 60 percent of households report that they paid one of these fees at least once in the last year. Contrary to common perception, the majority of households paying financial service fees is middle-class, relatively well-educated and technologically savvy. The lone exception is the check-cashing market, which is dominated by lower-income households with low levels of education who rely heavily on expensive non-bank, fee-based services.
“These new data make clear that fees tied to basic financial services add up to an enormous amount of money every year,” said Matt Fellowes, director of the Pew Safe Banking Opportunities Project. “Yet, it is just as clear now that the vast majority of these fees can be avoided.”
The Pew Safe Banking Opportunities Project develops standards for safe, affordable, fair and empowering bank accounts, promotes their voluntary adoption by banks and credit unions, and educates the public about the standards.