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. Steve J says:

    And yet I find the complete opposite: more and more businesses are charging a 3.9% or more surcharge if you use a credit card or a debit card and they will not charge this if you pay cash.

    Of course, they want to avoid the higher fees the credit card companies and banks impose upon them. Where in this article does it give reasons for businesses not to accept cash?

    The cashless society is not here yet and may be delayed.

  2. Nick Nac PaddyWack says:

    That’s odd, I’ve never seen anywhere that doesn’t accept cash. In fact, i see more and places posting notices, that cash is PREFERRED.

  3. Lastel says:

    Well as a farmer !
    We don’t have Credit Card Readers on the Farm.
    We don’t have robberies on the farm.
    We don’t have people stealing the cash register on the farm.

    We have the FOOD FOR CASH on the farm.

    So how long will you last not being able to buy FOOD?

    1. Nr says:

      As a farmer what other sort of things would you consider bartering for instead of cash? Silver? Ammo?

    2. Robert Fisher says:

      Well said! Growing up on a third generation family farm in what is now “The People’s Republic Of New Jersey”, I agree wholeheartedly! We had a bumper sticker growing up, “No Farmers, No Food”! Our Politicians & the General Public need to be reminded of that! Most do more actual work before breakfast than the majority does in a week!!!

  4. Steve Schultz says:

    I have never seen a sign in a place of business that said “No cash accepted”.

  5. Terry says:

    Banks trying to force feed us their profit margins should be against the Legal Tender Laws. Next, they will be telling us what we can, and cannot eat.

  6. Robert I. Eachus says:

    Actually, the restaurants and others are not required to accept cash. Paper money (Technically Federal Reserve Notes) say “This note is Legal Tender for all debts public and private. In other words if you tender (offer) US Federal Reserve Notes in payment of a debt, the merchant can accept or decline your offer. If they decline? You can put those notes back in your pocket–or wallet. You have, by tendering the cash, satisfied the debt.

  7. Gary Misch says:

    “Legal tender for all debts public and private.” Still, I’ll be the Biden Administration would approve of a cashless society — it’s a rioute to automatic surveillance

    1. Robert Gutheridge says:

      And I simply won’t do business with any place I will not accept US currency in the United States because as you said legal tender for all gets both public and private if a business in the United States won’t accept United States cash they should have their business license revoked in my opinion

  8. Steve says:

    Amex offers a fee-free card for people wanting to have an electronic payment option.

    It’s no different than people buying burner phones who don’t want to have a cell carrier relationship.

    To suggest a cashless operation is anti-unbaked is a false conclusion.

    People have a right to conduct business how they like. For me, cashless business keeps cost down as I don’t have to pay for cash accounting, bank trips and theft.

    To each their own.

  9. JohnD says:

    Don’t want my money? Fine, I’ll take my business to the one’s who do!

  10. Ben says:

    With paper currency the law-abiding citizens have privacy and a security not provided by a digital currency.

    I have never been mugged for cash but I have had my credit card number stolen.

    I typically use cash for smaller purchases and the freedom to have that choice is extremely important.

  11. Marie says:

    Americans don’t realize how close we are to a system that enslaves us to the Feds.
    Boycott ANY business that breaks the law and does not accept legal tender (CASH)!
    Keep privacy in all our transactions! Use cash as much as possible to prevent the rollout of Central Bank Digital Currency that will reduce us to slaves!

    DO NOT COMPLY!

  12. atlpcug says:

    IRS doesn’t accept cash either! There’s a 10% penalty if you try cash (or check) when it’s mandated to pay electronically.

  13. Willy G says:

    I’d like to know exactly how many non-bank people have complained about this being a problem. I mean really we’re mostly talking about coffee shops that charge eight dollars a cup, is that where your unbaked people are being so frustrated? Fake news.

  14. Edward Taylor says:

    Credit cards & debit cards track everything you buy & when or where you purchase it.
    Those make the credit cards bad for the purchaser & good for the government & businesses.
    They can know everything about you by these facts. Some credit cards charge 20% for
    their use & possible late fees. That makes them a loser for the users.

  15. Tony B. says:

    There are no federal policies or requirements for persons or businesses to accept coins or paper currency. However, states and municipalities can and have passed laws to protect those who cannot, or chose not to, bank. For example, lawmakers in NYC, San Francisco, Washington DC, Colorado, New Jersey and Massachusetts have all passed legislation requiring businesses to accept cash. Others states, (notably GOP controlled) Idaho, Mississippi, and North Dakota, have tried to pass legislation unsuccessfully where the business community and Republican lawmakers have sought to protect citizens from more mandates and keep businesses free to make their own policies.

  16. Josh says:

    One sided article doesn’t even touch on why the businesses are refusing cash because they elected to let criminals run freely to pillage.

  17. Daniel Stuz says:

    Businesses are private and they can choose to accept any legitimate form of payment. Saying that make it mandatory to ask businesses to accept cash is just not going to fly. There are many l legit reasons why the Government and private business will not accept cash:

    1. For the Government – Electronic transactions help keep a check on money laundering as well as tax evasion. Don’t expect businesses to be honest when they do cash transactions. Most of the time that goes under the radar as black money (undeclared cash with no tax paid on it).
    2. For businesses: With increasing crime rates, and the administration as well as local PDs doing very little to control it, it makes sense for a business to keep and empty cash register so that no perp can just walk in and collect your hard earned money.

  18. RAFO says:

    Bottom line to all of this is CASH=FREEDOM! No cash = no privacy of purchases = no freedom. Either you use it or loose it, just like muscles. EVERYTHING you buy with a debit or credit card is tracked. USE CASH AS MUCH AS YOU CAN! Avoid businesses that won’t accept it and let them know why.

    1. MDN says:

      Agreed. Not only that, but in America, businesses are required by law to accept cash. You can force them, or just don’t use them.

  19. Pio says:

    It is the way of the future. Already ubiquitous in China. Generational change as well.