The unfortunate reality is unbanked and underbanked families spend more time, money, and resources trying to access financial services.
By Aliyah Shaheed,
Northern California Organizers
Rise Economy organizers testify in favor of CalAccount in March of 2024 during a meeting held in Los Angeles by the CalAccount Blue Ribbon Commission.
As the school year begins, some California families are facing the financial burden of back-to-school shopping. On average, American households are expected to spend $875 on school supplies this year, according to the National Retail Federation. However, for families without bank accounts or with limited access to banking services, this burden is made worse by the fees imposed by traditional financial institutions, which amount to an estimated $931 per economically active household member annually. That’s where accessible, no-fee, no-penalty bank accounts can come in and truly help these families.
Many traditional bank accounts require customers to maintain monthly balance minimums or pay a monthly fee. This is the main reason why the numbers for unbanked individuals and households – those who have no formal bank account – and underbanked individuals and households – those who have a bank account but still depend on non-traditional, often predatory financial services – remain high amongst Black and Latinx Californians. In fact, 46 percent of all Black households, 41 percent of all Latino/x households, and 13 percent of Asian and Pacific Islander (API) households in California are unbanked or underbanked, according to a 2022 report from The Roosevelt Institute. The report also notes that banks and financial depositories rake in between $15 and $30 billion in revenue from overdraft fees annually. Black and Latino/x households bear the brunt of these fees. Black households are almost 2 times more likely and Latino/xhouseholds 1.4 times more likely to pay overdraft fees than white households, according to the report. Unfortunately, traditional banking relies on and profits from a traditional business model, including fees and opaque terms and conditions. As a result, the most financially vulnerable Californians are paying the cost to access basic financial services.
In 2025, the California State Legislature will have the opportunity to implement CalAccount, a program that will create a zero-penalty, zero-fee financial transactions account for all Californians.
Most recently a report was published to see if CalAccount is even possible and to map out what it would take for the state to bring this program to life. A recent market and feasibility assessment conducted by The RAND Corporation outlines the potential benefits of such a program. California State Treasurer Fiona Ma commended the analysis saying, in an official statement, “…hearing over-and-over again these real and raw, first-hand experiences make it clear as day that the time is now for a CalAccount program and that this simple program could make a lasting impact in helping Californians build wealth and end inter-generational poverty.”
The unfortunate reality is unbanked and underbanked families spend more time, money, and resources trying to access financial services. Even with products like BankOn, which is designed for low-income consumers, unbanked and underbanked families remain vulnerable to predatory alternatives such as check cashing services and payday lenders. Without a truly accessible and inclusive banking option, like CalAccount, these disparities will continue to exclude hardworking, low-to-moderate-income Californians.
Now is the time to create a financial product that genuinely serves all Californian families. With the support of community stakeholders, advocates, community-based organizations and leaders, we can make the vision of CalAccount a reality that promotes economic stability and ensures fair access to financial services.