DEFINITION of Unbanked

"Unbanked" is a slang term for adults who do not use banks or banking institutions in any capacity. Unbanked persons generally pay for things in cash or else purchase money orders. Unbanked persons also typically do not have insurance, pensions or any other type of professional money-related services. They may take advantage of alternative financial services, such as check-cashing and payday lending, if such services are available to them.


About 10 million American households are unbanked. Nationwide, about 7.7 percent of households are unbanked, but the rate of unbanked can vary greatly from one state to the next. Mississippi has the highest rate of unbanked, at 16.4 percent. Rates of the unbanked in some U.S. cities and counties exceed 20 percent. These places include Detroit; Newark, N.J.; Cameron County, Texas; Laredo, Texas; Hialeah, Fla.; Miami; and Starr County, Texas. Unbanked rates exceed 40 percent in Cleveland; Savannah, Ga.; Nashville; and Atlanta. Half of the unbanked had a bank account previously, but are now choosing to conduct their financial lives without one.

Why Persons Become Unbanked

Most unbanked are white, native-born Americans, but many immigrants, legal and illegal, are also 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 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. Extremely poor individuals may also have no need for the banking system as they try to survive their day-to-day lives, and may indeed find that they are unable to maintain minimum balances, afford account fees, or arrange for transportation to and from bank branches during banking hours.

Initiatives to Help the Unbanked

Politicians at the state and federal levels have attempted to help the unbanked gain financial literacy and benefit from banking services. Some such initiatives include former California Gov. Arnold Schwarzenegger’s Bank on California Initiative, and the FDIC’s Money Smart program. The U.S. Treasury Department’s Section 326 regulations, which allow banks and credit unions to accept identification issued by foreign governments, seeks to help undocumented aliens become banked. The U.S. Treasury Department makes federal payments to unbanked federal benefits recipients using a MasterCard prepaid debit card.