Person holding $100 bills

Someone counting money (Photo by Alexander Mils on Unsplash)

How many people don’t have a bank account? And just how difficult has it become to live without one?

These questions are becoming increasingly important as more businesses refuse to take cash in cities across the U.S. People without bank accounts are shut out from stores and restaurants that refuse to accept cash.

As it happens, a lot of people are still “unbanked”: roughly 6 million in the U.S., the latest data shows, which is about the population of Wisconsin. And outside of the U.S., more than a billion people don’t have a bank account.

I am a business school professor who researches society’s transition from cash to electronic payments. I recently visited Seattle and was amazed by the mixed signals I saw in many storefronts. Numerous shops had one sign proudly proclaiming how welcoming and inclusive they were — next to another sign saying “No cash accepted.” This tells people without bank accounts that they aren’t welcome.

Why not have a bank account?

Why would someone want to avoid using banks? Every two years, the Federal Deposit Insurance Corporation surveys households about their connections to the banking system and asks people without bank accounts why they don’t have one. People can respond with multiple answers. In 2021, the top reason — with over 40% of respondents choosing it — was that they didn’t have enough money to meet the minimum balance.

This is consistent with data showing that poorer households are less likely to have bank accounts. About one-quarter of those earning less than $15,000 a year are unbanked, the FDIC found. Among those earning more than $75,000 a year, almost every person surveyed had some type of bank account.

The second- and third-most common answers show that some people are skeptical of banks. Roughly one-third of survey respondents agreed that “Avoiding a bank gives more privacy,” while another one-third said they simply “don’t trust banks.”

Rounding out the top five reasons were costs of dealing with a bank. More than one-quarter of respondents felt bank account fees were too high, and about the same proportion felt fees were too unpredictable.

While many middle-class and wealthy people don’t pay directly for their bank accounts, fees can be costly for those who can’t maintain a minimum balance. A recent Bankrate survey shows basic monthly service fees range between $5 and $15. Beyond these steady fees, banks earn $4 to $5 each time people withdraw cash from an ATM or need services like getting cashier’s checks. Unexpected bills can result in overdraft fees of about $25 each time an account is overdrawn.

Woman making withdrawal of cash at local bank
While many middle-class and wealthy people don’t pay directly for their bank accounts, fees can be costly for those who can’t maintain a minimum balance. (© Syda Productions – stock.adobe.com)

Being unbanked in America

The FDIC calls people without a bank account “the unbanked.” People with a bank account but who primarily rely on alternative services such as check cashing outlets are called “the underbanked.”

The latest FDIC data shows almost 6 million unbanked and 19 million underbanked U.S. households. Given that 2.5 people live in the average household, this means there are over 15 million people living in a home with no connection to banks, and 48 million more in homes with only a tenuous connection to banks.

Combining the two figures means roughly one out of every five people in the U.S. has little or no connection to banks or other financial institutions. That can leave them shut out from stores, restaurants, transportation and medical providers that don’t take cash.

The true number of unbanked people is likely higher than the FDIC estimates. The questions on being banked or unbanked are supplemental questions added to a survey given to people at their homes. This means it misses homeless people, transients without a permanent address and undocumented immigrants.

These people are likely unbanked because you need a verified address and a government-issued tax-identification number to get a bank account. Given roughly 2.5 million migrants crossed the U.S.-Mexico border in 2023 alone, there are millions more people in the cash-only economy than the FDIC estimates.

How many people globally are unbanked?

While the U.S. has relatively high rates of people with bank accounts, the picture is different in other parts of the world. The World Bank has created a database that shows the percentage of each country’s population that has access to financial services. The World Bank’s definition of being banked is broader than the FDIC’s, since it includes anyone who uses a cellphone to send and receive money as having a bank account.

Overall, the World Bank estimates about one-quarter of the world’s adults don’t have access to a bank or mobile-phone account. But that varies dramatically by region. In countries that use the Euro, almost everyone has a bank account, while in the Middle East and North Africa, only about half the population does.

A more inclusive economy

Many of us swipe our credit cards, tap our phones or insert a debit card to pay without thinking. However, there are at least 6 million people in the U.S. and almost 1.5 billion worldwide who are unbanked.

When businesses stop accepting cash, the unbanked are forced to use payment methods like prepaid debit cards. However, these prepaid cards are costly. For example, Walmart, one of the largest U.S. retailers, offers a reloadable basic debit card. The card costs $1 to buy and charges $6 per month in fees, in addition to $3 each time someone wants to load the card with cash at Walmart’s registers. Paying a minimum of $10 just to set up a debit card for a few purchases is a steep price.

The next time you see a sign in a shop or restaurant window stating “No cash accepted,” you’re really looking at a business excluding many unbanked and underbanked people. Insisting that all businesses accept cash is a simple way to ensure everyone is financially included in the modern economy.

Article written by Jay L. Zagorsky, Clinical Associate Professor of Markets, Public Policy and Law, Boston University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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175 Comments

  1. Todd says:

    Absolutely right about the Government point. Only they’re allowed to Laundry money. On the second point that’s what the 2nd Amendment is for.

  2. ChazChan says:

    I walk out when I see a “No Cash” sign. I won’t cooperate with the globalist tyrants.

  3. Thomasthethomas says:

    Scary indeed. Mark of the beast coming. Counter it by making cash purchases all the time.

    1. Angela Pressley says:

      Just got some pennies back from a cash purchase at a Walmart store. Got pennies back minted in 2023. Thought pennies would be first to go? Still minting and printing fresh bills and coin. Cash isn’t going anywhere for a long time. Might have other beast tech but cash is here to stay for foreseeable future. That’s good news. All while these folks preach cashless society, I’m still getting and spending cash everywhere. Aren’t you?

      1. Marvin L McConoughey says:

        Yes. I like cash. All the pretty pictures and portraits, the soothing green color (mostly) on paper money, and the fact that my wallet is tailor made to securely hold paper money. I can spend it without telling people who I am, give it instantly to someone as a gift if I wish, and even send it through the mail, which I have done. One time I got enough cash to pay for a new car, which was great fun.

      2. Carlene artis smaltz says:

        No don’t think so
        This information is very much fake news or story’s

  4. Scott says:

    This makes no sense. Every plastic transaction costs the business money. Card fees only go up. Why would you get locked into that kind of payment system? Anytime they think they will get away with it the banks will take more money straight off your bottom line and add it to their bloated profits. I’ve yet to see this happening where I live. Opposite actually. Businesses fed up with banj fees going cash only is common.

  5. Scott Martin says:

    After our community was compromised by skimmers that were installed on ATMs at several locations. The Sheriff himself stated that everyone should use cash whenever possible. If we fall into this digital trap… We are all screwed.

  6. Informed says:

    While there are no Federal Laws on cashless payment in America, as of 26 Jan 2024, it is illegal for brick-and-mortar stores to refuse cash in several states, including Arizona, Delaware, District of Columbia, Idaho, Maine, Massachusetts, Michigan, Mississippi, New York, North Dakota, Oklahoma, Pennsylvania, New Jersey, Rhode Island, Colorado, and Connecticut. Additionally, it is unlawful for retailers not to accept cash in Washington D.C., Berkley, Chicago, New York City, Philadelphia, and San Francisco.

  7. J Hinojosa says:

    What about owing arears. We parents that owe child support can not have a bank account. Child support will wipe us out of all our money we deposit. I have payed up to $120,000.00. my kids think I am just a sperm donor to them. My daughter is 34 my son 32 . They were brainwashed by there mother. This is not fair. They are not allowed to get in touch with. I’m a grandparent , what lies are they telling my grandchildren.

  8. DanBoomerman says:

    I don’t do business with businesses that will not accept cash. Their loss, not mine.

  9. Joe says:

    Fear porn

    Homeless use cashapp

    And no government entity issues paper checks, even SSI issue a debot card if you dont have a bank

  10. Rennie says:

    Geez, What’s going to happen next? What is happening so awful that these businesses won’t take cash. They would rather run the risk of having peoples cards being declined after they spend 100$ on a meal that now they can’t pay for. I guess when it happens enough times they’ll rethink this whole idea of no cash accepted. That’s about the dumbest thing I’ve ever heard of any business doing. Technology is one thing but they are coming to depend on it too much. It will fail as well then what.

  11. Chris Wilhelm says:

    For those of you are unaware, Houston International Airport is completely “cash free”….if you’re hungry, better have a card…if you want a drink, better have a card,…if you want a magazine or a snack….better have a card…
    I found this out the hard way…figured that I would need cash “just in case”…
    SWA routed me from Dallas to Houston to connect with a flight to Portland…I know…let’s go further south to continue north…hmmm….
    Was concerned about how much $ that I had on three separate cards so I pulled cash from all three….leaving me with little money for dinner, drinks, etc…found out the hard way that you cannot get a whopper or a magazine or ANYTHING AT ALL at this airport….f**k….only in Texass is US money not accepted….
    Never going back again…screw Houston….secede already…then, and only then, will you appreciate the true value of the American dollar….