People who rarely or never use banks still recognize their value, according to a new report from the Federal Reserve Bank of Cleveland. The study summarizes findings from focus groups with 36 unbanked and underbanked individuals in Cleveland and Houston, exploring how they manage their finances and their attitudes toward banks and other financial service providers.
Several participants noted that relationships with banks could improve access to credit. As one participant said, “If you have good credit with a bank, you have good credit anywhere.” Some valued the convenience of bank locations and ATMs, while others saw bank accounts as more secure than alternative services.
Despite these perceived benefits, many participants expressed concerns about cybersecurity risks and overdraft fees associated with traditional banking. One participant described fee accumulation: “For the first three days they charge $7, and then after that, it was just $35 each day, each day, each day.”
Participants also discussed alternatives to banks. Many used prepaid cards because of their low and transparent fees but pointed out limitations such as lack of universal acceptance—especially for cards without chips. One participant recounted being approved for an online furniture loan but ultimately rejected because their prepaid card was not linked to a bank account: “They said you can’t use that kind of card.”
Fintech tools and apps were praised for facilitating peer-to-peer transfers; however, concerns about hacking persisted. Some users felt customer service from app providers was lacking: “They basically put their hands up and say, ‘I don’t know what to tell you.’”
The full report offers additional insights into how unbanked and underbanked individuals utilize cash, money orders, check-cashing services, among other methods.
The Federal Reserve Bank of Cleveland is part of the broader Federal Reserve System representing the Fourth Federal Reserve District—which includes Ohio, western Pennsylvania, eastern Kentucky and the northern panhandle of West Virginia (official website). The Cleveland Fed works to support economic resilience for low- and moderate-income communities within its district (official website), promotes stability in monetary policy (official website), oversees financial institutions in its region (official website), contributes research on community development (official website), and participates in formulating national monetary policy through its president’s role on the Federal Open Market Committee (official website). Beth M. Hammack serves as president and chief executive officer at the institution (official website).
Contact: Chuck Soder (chuck.soder@clev.frb.org; 216.672.2798)
