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Study Fees top reason low incomers in L.A. close bank accounts
LOS ANGELES (10/20/11)--The number of unbanked low-income households in Los Angeles without checking or savings accounts is rising, and unexpected or unexplained fees are the No. 1 reason they closed their accounts in 2010, according to a survey of predominately Hispanic, low-income households released by the Pew Health Group's Safe Banking Opportunities Project. About 32% of working poor households that left banking cited the fees; another 27% cited job loss or lack of funds. More families closed bank accounts (13%) than opened them (8%), said the project report. The report noted a local effort to promote banking--the Bank on LA campaign--slowed the rate of departure from banking but could not overcome persistent concerns of financially stretched participants about hidden or unexpected bank fees or the lack of sufficient funds for opening or maintaining accounts. “In today’s economy, where every penny counts, more needs to be done to bring low-income families into the financial mainstream,” said Susan Weinstock, project director at the Pew Health Group. “This data points to a real need for banks to better disclose their fees in a concise, easy-to-understand format.”
* Banked individuals use alternative financial service providers because of liquidity concerns. Thirty-one percent of banked individuals supplement their banking relationships with services from alternative financial service providers. Roughly 43% that use AFS bill pay services are concerned about the timing of the transaction posting and cash liquidity. And 37% of these said they can pay bills faster at a store-front check casher than at a bank. * Unbanked households said it is more difficult to come up with the minimum balance needed to open an account. That was the primary barrier to opening an account for 50%, compared with 30% last year. * Households that are banked are more able to save and less likely to suffer cash loss. Ninety-four percent of banked households keep some extra funds in a bank account, while 88% said they have at least one savings account. Eighteen percent of people relying solely on cash indicated they have victims of cash loss, including theft. The average amount lost was $729, equal to nearly two weeks of the respondents’ average household expenses.
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