(Reader Supported News) -- More than a quarter of all American households - about 68 million people - rely at least in part on nonbank financial services like check cashing or payday lending. These unbanked and underbanked households pay more - a lot more - for the kinds of basic financial services the rest of us take for granted. In 2012, the average income for these families was about $25,500, and they spent an average of $2,412 just on interest and fees for nonbank financial services. That was just under 10 percent of their annual income - or about the same amount as they spent on food.
Think about that: The average underbanked family spends roughly the same amount on getting checks cashed, bills paid and the occasional short-term loan as they do on food for an entire year. These families aren't looking for mortgages and business loans that require more business judgment. They just need access to basic banking services.
Why aren't these families using traditional banks to cash their paychecks and pay their bills? Many have been shut out of traditional banking. Banks are rapidly abandoning low-income and rural neighborhoods. SNL Financial documents a shift in banking, with banks opening new branches in areas where the median income is over $100,000 while simultaneously closing branches in areas where the median income is under $50,000, shutting out families of modest means.
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