Do Minorities Avoid Using Banks?

We all know the familiar scenario. You walk past a check cashing place during a pay period, and you see a long line of blacks and Latinos cashing their paychecks. Perhaps some folks are lovingly wiring money to a needy relative. And you ask yourself why? Why do people in our communities so much more often use these establishments that charge high fees? Why not have a bank accounts that can help you build credit, while allowing you to wire money directly to other banks accounts for far cheaper than Western Union? US Today reports that "53% of African-American households and 43% of Hispanic households use check cashers or similar services instead of or in addition to banks." And, while it might seem like this is a low-income phenomenon, studies show that "[h]ouseholds that have bank accounts but still use check-cashing services are just as likely to be moderate-income - earning up to $50,000 a year - as low-income." (Source) This must mean that the check cashing habits of many people we know are more of a deeply-engrained behavior than a financial necessity. According to some experts, blacks and Latinos should save their money by using traditional banks. In fact: "It is perfectly possible to use and manage a checking account without ever incurring a dime in fees," said Carol Kaplan, spokesperson for the American Bankers Association. Yet the study shows that banks "need to become more innovative to create products that serve all types of customers. And we need to find a way to do it and still have it be profitable," Kaplan said. (Source) Apparently the FDIC is looking into ending this tradition of poor money management by understanding its root causes, and pressuring banks to do more to serve our needs. Hopefully these efforts will help blacks and Latinos keep and grow our money. It's amazing, but something as simple as more people using banks, combined with more banks simplifying their services, could go a long way towards making our communities more financially stable. Do you or people close to you habitually use check cashing institutions? If so, why? And what could encourage Latinos and blacks to start using banks instead? Leave your thoughts below! Follow BV on Money on Twitter!