Across the nation, the rate of banked households has grown since 2019, according to the latest biennial FDIC (Federal Deposit Insurance Corporation) survey data release.

The survey, conducted in June 2021, collects information on households’ use of different financial products, including both bank and nonbank products and services. At both the national and Illinois levels, 95.5% of households had a checking or savings account with an FDIC-insured institution in 2021.

The FDIC also reported record lows in unbanked* households. At 4.5% nationally and 4.4% statewide, the rates of unbanked households are the lowest seen since the FDIC began the survey in 2009.

Not surprisingly, consumers are increasingly going virtual with banking. In 2021, 44% of Americans and 48% of Illinoisans that had accessed their account in the past year reported mobile banking as the most common way they did so.

Trends exaggerated regionally; higher rate of unbanked households in Chicago region**

While Chicago and Illinois saw greater declines in unbanked households from 2019 to 2021, Chicago maintained a higher rate than both the state and national averages.

  • Chicago and Illinois saw a greater decline in unbanked households from 2019 to 2021, dropping 2% in Chicago and Illinois, compared to just a 1% drop nationally.
    • This is an especially positive trend in the Chicago region, reversing an increase in unbanked households from 2017 to 2019.
  • Use of mobile banking increased most in Chicago: from 2019 to 2021, the rate of mobile banking grew 15%.
    • Likewise, person-to-person interactions in physical bank branches declined most in Chicago and was the most common method of account access for just 1/10 of the banked population.
    • Use of bank tellers fell nearly 10% in Chicago compared to a 6 and 7% decline nationally and statewide.
  • Irrespective of the impressive decline in unbanked households, Chicago’s unbanked rate of 5.4% is 20% higher than the national and state rates.

Fewer racial and ethnic minority households have bank accounts

While overall trends suggest an optimistic outlook on economic health in the post-pandemic era, racial and ethnic disparities persist. At the national level, 11.3 and 9.3% of Black and Latino households, respectively, were unbanked, compared to just 2.1% of Whites.

For banked and unbanked rates at the state and local levels, the 2021 data only indicate whether the respondent identified as White but provide no other racial or ethnic identifiers. In Illinois, 9.9% of households that did not identify as White were unbanked, while merely 1.5% of White households were unbanked.

In Chicago, the disparity was even larger – 11.7% of Chicago households that did not identify as White were unbanked, while only 1.0% of White Chicago households were unbanked.

Nonbank trends indicate positive policy effects, but the work must continue

Key takeaways:

  • Enacted in March 2021, the Predatory Loan Prevention Act (PLPA) capped rates at 36% APR for consumer loans provided by non-depository financial institutions. The survey measures use of nonbank transactions like pawn, payday, and auto title loans, which also tend to be predatory products due to their exorbitant rates.
    • The survey respondents were asked about their behavior within the last 12 months, so the data only reflect a few months of post-PLPA activity in Illinois.
    • Significant declines in auto title lending, which had a pre-PLPA average APR of 178%, show the passage of the 2021 PLPA is working. At 0.3%, the rate of auto title lending in Illinois shrunk to just one quarter its rate in 2019.
    • Payday lending dropped some in Illinois overall, but increased in the Chicago region compared to 2019. This trend could have several causes and is likely driven most by pre-PLPA activity. Post-PLPA, the trend may reflect consumers reaching for more affordable alternatives, including borrowing from a Community Development Financial Institution or credit union, seeking support from friends/family, and using credit cards.
    • Stopping predatory actors from attempting to evade the PLPA must be a policy priority. We must continue creating safe and affordable financial products for vulnerable populations.
  • Covid Government Benefits
    • Decline in nonbank check cashing (a drop of 3% in Illinois) along with overall growth in banked households demonstrates opportunity afforded by the pandemic, as the release of government unemployment benefits and stimulus checks prompted many to open bank accounts to receive payments more quickly via ACH/direct deposit, or to avoid paying check cashing fees on these benefits.
    • Nationally, nearly half of households reported government pandemic benefits as a factor contributing to their decision to open a bank account.

Nationally, the most commonly cited reasons Black, Latino/a, and lower income households (annual incomes less than $50,000) remained unbanked were:

  • (#1) do not have enough money to meet minimum balance requirements,
  • (#2) do not trust banks and
  • (#4/5) bank account fees are too high.

Bank On, a national movement with many state and local cohorts (including cohorts in Chicago and Illinois), certifies affordable bank accounts that address those expense-related concerns, but awareness of such accounts is still limited.

These new consumer financial behavior data show progress, but also demonstrate that our work driving economic prosperity forward is as urgent as ever. Advocates, policymakers, and stakeholders must continue urging financial institutions to proactively build trust with community members while creating accessible and affordable products and services that meet the unique needs of lower income, Black and Latino/a households. We also must ensure that consumers know which products financial institutions offer.

Woodstock pairs research with policy advocacy to increase financial and economic health locally, statewide, and nationally. We will continue to lift up these issues with policymakers and other stakeholders to further racial equity and economic prosperity.

Unbanked” households do not have a checking or savings account with an FDIC-insured institution; “Underbanked” households have a savings or checking account but regularly use other financial services such as payday, pawn, or auto title loans

** “Chicago region” and subsequent uses of “Chicago” refer to the Chicago–Naperville–Elgin, IL-IN-WI Metro Area, which includes 4 counties in Indiana and 1 in Wisconsin