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Fewer Kentuckians Are Using Banks

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The number of Kentuckians who are "underbanked"—that is, people who don't participate in the banking system—has increased.Nearly a third of Kentuckians (33.2 percent) are considered “underbanked,” according to arecently released report from Federal Deposit Insurance Corporation.This means that those residents may not have a bank account and they depend on other services—like check cashing services or payday loan systems—for their banking needs.  The residents' "underbanked" status can potentially lead them to pay greater costs for money-related services.In 2011, the rate was just more than 31 percent.

Nationally, about 20 percent of households are considered to be underbanked, according to the study.  Nan-Ting Chou, an economics professor at the University of Louisville, said she was surprised to hear the number of underbanked residents in the state was so high.A number of factors play into the issue, she said.“It could be there are no close by banks or these people don’t know, or they don’t have enough savings to open a bank account,” she said.Chou said when people don’t use banking services when dealing with financial exchanges they could be losing a lot of money. And she said it could stem from a lack of education.“Maybe they just don’t have the knowledge that there is a better way to cash their check and do their finances,” she said.In Kentucky, Hispanic residents—at more than 30 percent—are the most underbanked, according to the studyAmong white residents, the underbanked rate is nearly 22 percent and about 29 percent of African Americans are considered to be underbanked.

Chou said banking systems may seem intimidating, but they shouldn’t.“With today’s society, it shouldn’t be an intimidating thing to go to a bank and open an account,” she said.

Jacob Ryan joined LPM in 2014. Ryan is originally from Eddyville, Kentucky. Email Jacob at jryan@lpm.org.