Unbanked and Why do people choose to be unbanked?
What Is Unbanked?
"Unbanked" is the term used for adults who don't believe in banks and banking institutions and pay for things in cash, use money orders or prepaid debit cards. These people don't have insurance or pensions. They don't use professional financial services and use alternatives to financial services like payday loans and check-cashing services whenever these services are available.
While often an issue, in the developing world, there are pockets of "unbanked" adults in developed countries, including the United States.
"Underbanked" is a related term that refers to families that prefer to manage their finances through cash transactions instead of more traditional financial services, such as chequing accounts, savings accounts, credit cards, and loans.
Although some households are considered "unbanked" because they do not use banks or financial services at all. The "unbanked" segment of the population may have chequing or savings accounts, but often access less traditional financial products and services, such as short-term payday loans and check cashing services.
Why People Become "Unbanked "
People can choose to be "unbanked" for many reasons. Criminals avoid using financial institutions because law enforcement officials can track their actions in their accounts. Older people who have survived "The Great Depression" may have a deep distrust of all financial institutions and therefore, do not use them; the same can be true for recent immigrants who experienced banking crises in their countries of origin.
Money deficient individuals may also have no alternative but to become "unbanked, as they try to survive their day-to-day lives. They may indeed find that they are unable to maintain minimum balances, afford account fees, or arrange for transportation to and from branches during banking hours.
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