October 2011

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Low-Income Los Angeles Households Drift Further 

from the Financial Mainstream
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TABLE OF C

1 Executive S

4 Survey Responde

Figure 1: Household Income Segmentation, hase I 

5 Intro

 Key Findings

7 The Unbanked Population Persists i

Figure 2: Reasons for Leaving the Bankin

9 The Low-Income Population in Los Angeles Faces Successive Bar

Figure 3: Reasons for Being Un

Figure 4: Components of Conveni

12 BankingIs Tied to Family Economic Sec

Figure 5: Savings Behavior of the 

Figure 6: Ranking of Financial Hea

Figure 7: Remittance Us

 Discus

16 Assessing the Impact ofBank on LA in the Face of a Net De

17 Identifying and Overcoming Barriers to Banking, Staying Banked a

Accounts Effect

21 BankingIs Associated with Greater Financial Security and As

23 Conclusi

24 Recommen

27 Appendix: Method

29 Endn

32 Acknowledgm
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Low-Income Los Angeles Households Drift Further from the Financial Mainstream

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EXEC

Seventeen million Americans live without a bank account, exposing themselves to risks

of monetary loss, fraud, and high costs associated with less regulated financial services 

markets.1 In this two-phase longitudinal survey of 2,000 low-income Los Angel

households, the Pew Health Group’s Safe Banking Opportunities Project aims to fur

local, state and national understanding of the financial needs of underserved populations 

in our urban centers and the opportunity for banks to capture this market. The study

explores the connections between financial services, the populations they serve or are 

failing to serve and the financial stability of those populations.

Our in-depth survey of low-income households—1,000 with a bank account and 1,000

without—reveals three key findings:

•	 Between 2009 and 2010, the ranks of the Unbanked increased, with more familie

leaving banking than opening bank accounts. One-third (32 percent) of households

that left banking cited unexpected or unexplained fees as their reason for closing their 

bank accounts; another 27 percent attributed their departure from banking to the loss 

of a job or lack of funds. Among all unbanked households, half (50 percent) report

that they are unable to deposit the minimum balance required to open an account, up 

from 30 percent identifying this as a barrier to opening a bank account during the first 

phase of the survey.  local effort in Los Angeles to promote banking—the Bank

LA campaign—slowed the rate of departure from banking, but it could not overcom

persistent concerns by the financially-stretched participants of the survey about hidden 

and unexpected bank fees and lack of sufficient funds for opening or maintaining 

accounts.

•	 Opening an account is only the beginning of a beneficial banking relationship.

After overcoming the barriers to opening a bank account, low-income workers face

new and additional obstacles to maintaining their bank accounts and to using those 

accounts to meet their financial services needs. Our study finds that banks hold

significant service and location advantages over alternative financial services (AFS)

providers: 79 percent of crossover respondents report that banks have better customer 

service than check cashers and 59 percent of crossover respondents prefer the location 

of banks to that of check cashers. However, these customers continue to supplement 

their depository accounts with services from AFS providers, citing the need to access

their cash quickly (30 percent) and to purchase multiple services, like money orders and 

remittances, at one time (38 percent).
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•	 Among the working poor, banking is associated with savings. Even when faced

with high rates of job loss and declining household income during the period of our 

survey, the Banked were better able to sustain their savings behaviors, including those

associated with long-term goals such as paying for college. Eighty-eight percent of

banked households have at least one savings account and, even in times of economic 

turmoil, 67 percent of the Banked actively save at least some of the time. Among th

Unbanked, only 9 percent report being able to save

Our analysis leads to the following policy recommendations

Overcoming Barriers to Banking: The significant barriers preventing unbanked lowincome households in Los Angeles from opening bank accounts are concerns a

fees as well as a perceived lack of liquidity to meet the minimum opening balance 

requirements and lack of proper identification. Policy makers, banks and employers

each have a role to play in making bank accounts more affordable and accessible to the 

working poor.

•	 Employers and government agencies can offer direct deposit to workers and recipients

of public assistance.

Definitions

Banked: Households with at least one checking or savings account at a bank or 

credit union.

Unbanked: Households that do not have a bank account and rely on non-bank 

alternative financial services providers for financial services or transactions.

Newly Banked: Households that did not have a bank account during the first 

phase of our survey and opened at least one bank account before the second 

phase of our survey.

Newly Unbanked: Households that closed all of their bank accounts between 

the first and second phases of our survey.

Crossover: Households with at least one bank account that regularly use 

non-bank providers for some financial services or transactions (sometimes 

popularly referred to as “underbanked”).

Cash Economy: Households that do not have a bank account and conduct all 

their financial dealings in cash.
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•	 Government workforce placement programs can introduce bank accounts to the newly

employed.

•	 Policy makers and the banking sector can use public-private collaborations to reach the

Unbanked and to set safe terms for starter accounts

Helping Families Stay Banked: Pew’s research indicates that unexpected 

unexplained fees drive low-income households away from banking. Banks and policy

makers should take steps to reduce the surprise of these fees and increase transparency.

•	 Policy makers can require, and banks can implement, fair and transparent fees

•	 Banks and banking regulators can end deposit delay and require depository

institutions to post deposits and withdrawals in a fully-disclosed objective and neutral 

manner, such as chronological order, which does not maximize overdraft fees.

•	 Banks can increase the availability ofATM networks in low-income areas to red

reliance by customers on out-of-network ATMs carrying high fe

Encouraging the Building of Savings and Credit: Pew found that low-inc

households with bank accounts continue to rely on costly alternative financial services to 

meet their financial needs, while also seeking to use savings mechanisms. To encourage

the working poor to build savings and credit, banks, community organizations, local 

leaders and policy makers can promote policies that allow households to use their bank 

accounts effectively and beneficially. Additionally, the use of AFS by banked household

presents an opportunity for banks to utilize their competitive advantages to capture this 

market for revenue-generating financial services.

•	 Banks can provide a comprehensive suite of products including money orders,

remittances, check cashing, bill pay services and personal loans.

•	 Community organizations, local governments, efforts to bank the Unbanked, like th

Bank On programs, and depository institutions can provide financial education to hel

new customers manage costs and build up assets.

•	 Banks, policy makers and community organizations can capitalize on household

aspirations to build family financial security by providing low-cost and easy-tounderstand opportunities for savings and asset-building.
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Survey Respond

Our survey population is predominantly female and foreign-born and identifies as

Hispanic/Latino. Between survey phases, there was a 28 percent attrition rate. Tho

who dropped out of the survey between phases were disproportionately male, residents 

of control neighborhoods (those not targeted in the initial phase of the Bank on

program), earners of slightly higher incomes than the general survey population, voters 

in the United States and English-speakers. In Phase II, overall household in

declined, with 78 percent of respondents reporting household incomes below $25,000, 

up from the 71 percent who reported such income levels in Phase I. Additionally, t

percentage of female respondents increased slightly, as did the percentage of foreignborn respondents. The mean age of respondents increased significantly, up eight years

between PhaseI and Phas

This population is the working poor with the vast majority of household income coming

from employment. The form of income was very similar in both survey phases, with the

majority of respondents in both phases being paid by check. Monthly expenditures rose

slightly between phases, up $19 for banked respondents in PhaseII and $44 for unbank

respondents in Phase II. For information on survey methodology, see the Appen

figure 1 Household Income Segmenttion, P

71%

22%

5% 2% 3% 2%

17%

78%

Household Income

■ $0–$25K

■ $25K–$50K

■ $50K–$75K

■ $75K +

Overall, respondents report lower household incomes in Phas II of our survey compared to d

from Phase I, perhaps reflecting declining economic conditions. In both phases, most responden

had incomes below the federal poverty line for a family of four ($22,350 in 2011, according to U.S.

Department of Health and Human Services Poverty Guideline

Phas I P
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INTRO

Banking is a cornerstone of financial security.A safe, affordable deposit account enable

families to securely put away money, affordably pay bills and better plan for the future. 

Without government-insured checking accounts, low-income families operate on the

financial fringe. These unbanked families, those without a checking or saving account,

conduct business entirely in the cash economy or use costly alternative financial services 

(AFS) providers, including check-cashing outlets. Families without bank accounts struggle

to meet their basic financial needs, much less save for a rainy day or long-term goals.

To inform public efforts that promote safe and affordable bank accounts, the Pew Healt

Group developed a portrait of the financial services usage and banking behaviors

of low-income households in Los Angeles. In 2009, the Safe Banking Opportuni

Project began a survey of 2,000 low-income households in Los Angeles, including 1,0

households with at least one bank account and 1,000 households with no bank accounts. 

The first phase of the survey was conducted from July to September 2009, followed by

the second phase from May to September 2010. Our survey examined households i

eight low-income neighborhoods around Los Angeles, including four targeted by th

Bank onLA pilot effort to bank the Unbanked (see page 1

In July 2010, we published findings from Phas I of the survey in Unbanked by Choi

3

There, we reported on the different patterns of financial behavior among banked

and unbanked families, delving deeply into the types of services used by low-income 

households and the factors influencing their participation in different segments of the 

financial marketplace. In Phase I, we found that most of the Unbanked have never 

bank accounts and we identified the alternative strategies that these households use to 

manage their money.

This report builds on the findings presented in Unbanked by Choice to develop a more

refined portrait of the financial behavior and needs of low-income communities in Los

Angeles and to identify the effects that banking practices and the local efforts to bank

the Unbanked have had on these communities. We seek to improve the effectiveness o

efforts to bank the Unbanked and to promote policies that enable low-income families

to maintain and fully use their bank accounts as productive clients of mainstream 

financial institutions.

Our analysis of the data gathered in this follow-up survey of financial services behaviors

and household financial condition indicates the following key findings:

•	 The unbanked population persists in Los Angeles. Despite local efforts to bank th

Unbanked, more families left banking than joined banking during the survey period.

We find that there was slightly greater adoption of banking and significantly less

movement out of banking in the neighborhoods targeted by Bank on LA, a publ

private initiative to bring families into banking.
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•	 Low-income households in Los Angeles face successive barriers to getting a ban

account, staying banked and using their accounts fully. While households that had

never had a bank account cited minimum opening balance requirements and lack of 

proper identification to open an account as the major reasons they remain unbanked, 

households that left banking most often cited unexpected or unexplained fees as their 

reason for closing their bank accounts. Many banked families—crossover customers

continue to use check cashers and other nonbank financial services because of 

concerns over transparency and liquidity. Getting unbanked individuals to open bank

accounts is an important start, but it is only the beginning.

•	 Banking is associated with savings among the working poor. Those who had ban

accounts were more likely to save and, in tough times, were better able to weather 

the economic storm. The Banked used ongoing savings mechanisms, rooted in thei

aspirations for a better future for themselves and their families. Banking mechanisms

are tied to financial security by reducing costs spent on obtaining financial services, 

promoting saving and reducing the risk of cash loss.
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KEY

Following low-income Los Angeles households during a period of economic decline, ou

survey identified key factors in the departure from banking, challenges still facing local 

efforts to promote banking and patterns in financial services use and financial well-being.

The Unbanked Population Persists in

Despite the efforts of the Bank o LA campaign, during the period of our research, m

respondents became unbanked than became banked. While our survey was conducted

during a period of severe job loss in the survey population, we found that the main 

reason households fell out of banking was not job loss but being hit with unexpected 

bank fees.

•	 Over a 12-month span, more people left banking than joined banking. Between the

two phases of the survey, 13 percent of respondents who had been banked in Phase

dropped their bank accounts and 8 percent of respondents who had been unbanked in 

PhaseI opened checking accounts. The newly unbanked population, those who clos

their bank accounts since the first survey, largely demographically mirrors the overall 

survey population.4

•	 Unexpected fees were the primary drivers of account closure. The Newly Unban

most often cite unexpected and unexplained fees as the reason for their departure 

from banking. One-third (32 percent) of the Newly Unbanked cite these fees; anoth

quarter (27 percent) cite either lack of funds or unemployment. Small numbers of 

respondents cite poor customer service (6 percent), and all other options included in 

the survey were selected by less than 1 percent of respondents. One-third (35 percent)

of newly unbanked individuals do not attribute their decision to end their banking 

relationship to any option available in our survey.5

figure 2 Reasons for Leaving the 

Hidden or unexpected fees are the most common reason that our respondents closed their bank 

accounts, followed by lack of funds or loss of job.

6% 27%

35% 32%

■ Hidden or Unexpected 

Fees

■ Lack of Funds or 

Unemployment

■ Upset about Customer 

Servies

■ Other
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•	 Overall, neighborhoods targeted by the Bank on LA pilot program did not accoun

for more of the Newly Banked than did neighborhoods not targeted by th

Bank on LA pilot. The Newly Banked were evenly distributed across neighborh

proportional to the distribution of successfully recontacted survey respondents. Newly

banked individuals represented anywhere between 2 percent and 7 percent of all 

respondents in a given neighborhood. The neighborhood with the most significant

increase in newly banked residents was Lincoln Heights, which was not a Bank o

pilot site. Close behind Lincoln Heights were two Bank n LA pilot neighborh

Vernon Central and Boyle Heights. Each one had 6 percent of its respondents rep

that they had begun banking.

•	 The Bank on LA program appears to have slowed the rate at which the city’

poor leave banking. In six of the eight neighborhoods in our survey, respondents

left the ranks of the Banked at a greater rate than they joined. The other tw

neighborhoods were essentially flat in this regard. In the four neighborhoods

targeted by the Bank onLA pilot program, slightly more people left banking th

entered banking. However, the net loss over the past 12 months in the four Bank

on A pilot neighborhoods (-1.25 percent) was less than half the net loss in the fou

control neighborhoods (-2.93 percent), a statistically significant difference.6

•	 Brand awareness of Bank on LA is very low. Overall, only 6 percent of responde

are familiar with Bank onLA by name. Awareness is highest among the Newly B

(13 percent) and lowest among the Newly Unbanked (3 percent). Among all unbank

individuals, Bank on LA’s target population, 9 percent are familiar with the progra

Among all survey respondents, awareness of the campaign in pilot neighborhoods

(7 percent) was only slightly higher than in control neighborhoods (6 percent). Overall,

more than half (54 percent) of the Unbanked report receiving some sort of literature

encouraging them to open an account, though they did not identify it as coming from 

the Bank onLA campai

•	 The Newly Unbanked rely heavily on the cash economy. Most newly unbank

individuals rely on the cash economy, with 59 percent conducting business entirely 

in cash and another 26 percent conducting business mostly in cash with some use of 

AFS as well. One-quarter (28 percent) of the Newly Unbanked continue to save mon

keeping cash hidden in a “secure place.” However, most of these savers (63 percent) 

are saving less than they did when they had a bank account.

•	 While most of the Unbanked have never had a bank account, those who di

previously have accounts chose to close them. Among the Unbanked, more tha

half (58 percent) have never had a bank account. However, three in ten (30 percent) 

previously had a bank account and willingly closed it. Only 6 percent of the Unbanke

previously had an account and now are unable to qualify for one, generally because of 

past trouble in maintaining sufficient funds to support a checking account.
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The Low-Income Population in Los 

Successive Barrers 

The growing ranks of the Unbanked and Newly Unbanked, and the fact that many ban

individuals also rely on alternative financial services providers, indicate that the lowincome population in Los Angeles faces obstacles not only in opening an account, bu

also in keeping it open, and in using it to its full benefit to build savings and credit. The

issues that prevent families from keeping and fully using an account are distinctly different 

than the problems that prevent them from opening an account.

•	 The primary obstacles to opening a bank account are minimum balance requirements, 

concern over hidden fees and perceived lack of proper identification. Fully half 

(50 percent) of the Unbanked cite their perceived inability to deposit the minimum

opening balance as a primary obstacle to opening an account.7 The impact of the barrier

posed by this requirement grew significantly from the first phase of the survey, when less 

than a third (29 percent) of the Unbanked identified the minimum opening balance as a

barrier to opening an account. Identification was another obstacle for many respondents.

Although financial institutions have the legal authority to accept identification issued

by foreign governments, 14 percent of unbanked individuals cite the lack of proper 

identification or documents as a reason for not having a checking or savings account. 

Fees are another issue: 12 percent of the Unbanked identify a concern with hidden or

expensive bank fees as the primary reason they choose to remain unbanked. Other

common barriers to opening a bank account include a lack of understanding about 

banking systems (10 percent), lack of time to open a bank account (14 percent) and 

difficulty managing accounts (10 percent). Only 2 percent of unbanked respondents

report being unbanked because they appear on the watch list known as ChexSystems.

figure 3 Reasons for being u

The Unbanked face numerous barriers to opening a bank account, including inability to deposit th

account’s minimum opening balance requirement, a perceived lack of necessary identification documents, 

and concerns about fees, account management and misunderstanding of the banking system.

0%

10%

20%

30%

40%

50%

60%

Do Not Have 

Enough 

Money

Lack Proper 

Identication

Lack Time to 

Open an 

Account

Bank Fees 

Are High 

and/or 

Hidden

Difculty 

Managing 

Accounts

Do not 

Understand 

the Banking 

System

Prefer 

Anonymity of 

Check 

Cashers

Do not Trust 

the Banking 

System

Listed on 

ChexSystems

50%

14% 14% 12% 10%

2% 4% 6%

10%

45%
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•	 Repeated ATM and overdraft fees make bank accounts expensive for thi

population. Banked individuals in our survey use out-of-network ATMs frequent

incurring fees on more than half of their TM transactions. We do not know whether 

is due to a lack of TM infrastructure in their neighborhoods or lack of understandi

about how their banks’ TM systems work, but the collective impact of these fees 

high. Fees for using an out-of-network TM average $3.74 per use.9 At the rate of 

reported in our survey, these fees cost a banked individual $162 each year. Banked

individuals who incur out-of-network fees do so an average of 3.6 times per month. 

Expensive overdraft penalty fees also pose significant concern. Three in ten (29 percent

banked individuals had been charged an overdraft fee in the past seven to 12 months. 

Of those who overdrafted, 64 percent were charged multiple fees as a result

•	 Banked customers continue to use costly Alternative Financial Services (AF

providers to obtain banking products that they perceive as providing greater 

control of funds and liquidity. Almost one-third (31 percent) of banked individuals

supplement their banking relationships with services from AFS providers. The mos

commonly used products are remittances (49 percent) and money orders or cashier’s 

checks (34 percent). Another 10 percent of Crossovers—those who have a ban

account and also use AFS—use these providers for check cashing. More than onethird (38 percent) of Crossovers indicate that they have bills that require a mon

order, and nearly all get their money orders from AFS providers rather than a bank.

Four in ten (43 percent) of crossover customers using AFS bill pay services are

concerned about timing of transaction posting and cash liquidity: over one-third of 

Crossovers (37 percent) indicate that they can pay bills faster at a storefront check

casher than at a bank, and another 7 percent are specifically worried about bouncing 

a check if they use the bank.

•	 Among the crossover customers, banks hold considerable advantages in location 

and customer service. On both customer service and prices, 79 percent of crossover

customers prefer banks to check cashers. For proximity to home or work, 59 percent of 

crossover customers prefer banks to check cashers. Among crossover customers, nearly

one-third (30 percent) report using AFS because they need access to their cash quickly.

Another 38 percent of Crossovers use check cashers because these providers enabl

customers to purchase several services at one time.
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figure 4 Componens of Conv

Customers who have bank accounts and also use alternative financial services providers rank banks

higher than check cashers on customer service, location and prices. However, these customers continue 

to use check cashers to meet their financial services needs because of concerns about transaction 

timing, liquidity and product offerings.

... but fall behind on transaction timing and product offerings.

■ Bank

■ Check Casher

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Customer Service Prices Proximity to Home 

and Work

79%

15%

79%

17%

59%

38%

Which financial services provider is better on the following

Why do you use a check casher? Why do you pay bills at a check cashe

22%

■ Need Money 

Faster

■ Convenience of 

Location or Hours

■ Purchase Multiple 

Services at One 

Time

■ Other

■ Can Pay Bills 

Faster

■ Worry about 

Bouncing a 

Check

■ Some Bills 

Require a Money 

Order

38% ■ Other

18%

37%

7%

38%

7%

30%

25%

Banks compete effectively on customer service, location and prices 
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figure 5 Savings behaior of 

Those with bank accounts save either regularly or when they can, and some are saving for long-term

goals like paying for a college education. Percentages may not add to 100 due to rounding

How Would You Characterize Your Savings Behavior?

■ Save Fixed Amount each 

Month

■ Save when Possible, but 

not every Month

■ Not Currently Saving

■ Currently Living Off Savings

47%

18%

33%

4%

How would you characterize your savings behavior

Banking Is Ted to Family Ec

•	 The Banked utilize savings mechanisms and linked accounts. Nearly all banke

respondents (94 percent) keep at least some of their extra money in a financial 

institution, and almost as many (88 percent) have at least one savings account in their 

name. Among these savings accounts, 29 percent are being used for long-term goals,

including paying for education, home ownership and retirement. One-third (33 percent)

of banked respondents in this phase of the survey report that they do not save at 

all. However, nearly half of the Banked (47 percent) save when they can. One-thir

(34 percent) of the Banked use an automatic savings feature to move money regularly

from a checking account to a savings account. One-quarter (24 percent) of the Banke

move money between accounts as needed to manage cash flow. Almost one-fifth

(19 percent) have an overdraft transfer feature linked to their savings account.
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•	 In times of economic decline, the Banked fare better. The majority of househol

in both banked and unbanked populations live below the poverty line.10 While both

groups experienced similar rates of decline in household income between PhaseI an

PhaseII of the survey, the Banked were better able to keep their heads above wat

Over the 12-month study period, 41 percent of the Banked and 45 percent of th

Unbanked report declines in household income. In characterizing their overall financia

situation, 16 percent of all respondents indicate that they make enough money to pay 

bills and save for the future. Among banked individuals, 25 percent are able to pay

bills and also save for the future. This rate has held steady in the nearly 12 months

between survey phases. Among unbanked individuals, only 9 percent report making

enough money to pay bills and save for the future, down from 11 percent in the first 

phase of the survey. The cash-only subsegment of the Unbanked fares worst, wit

5 percent of cash-only respondents reporting that they make enough money to pay 

bills and save for the future.

figure 6 Rankng of Fina

In Phas II of the survey, the banked respondents continued to rate their financial health as in better sh

than did the unbanked respondents—one-quarter (25 percent) of the Banked say they are making enough

to pay their bills and even save, compared to just 9 percent of their unbanked counterparts. Moreover, a

greater number of the Unbanked indicate they are not making enough to pay their regular bills

Financial health of Banked and Unbank

0%

10%

20%

30%

40%

50%

60%

Not Making Enough to Pay 

Regular Bills

Making Enough to Pay Bills 

but not to Save for Future

Making Enough to Pay Bills 

and Save for Future

■ Banked (Phase I)

■ Banked (Phase II)

■ Unbanked (Phase I)

■ Unbanked (Phase II)

27%

24% 25%

11% 9%

49%

44%

51%

54%

38% 37%

31%
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•	 The Unbanked are somewhat more likely to struggle to pay their bills. Ove

one-third of the Unbanked (37 percent) report being unable to pay all of their bills.

Within that group, 41 percent of respondents in the cash-only subsegment indicate

this same trouble. The Banked fared a bit better, with 31 percent reporting inabilit

to pay all of their bills.

•	 The Banked continue to set earnings aside through remittances. This largely foreignborn population sets a significant percentage of their earnings aside in the for

of remittances sent back to family in their country of origin. While the frequency of

remittances is comparable between banked and unbanked respondents—55 percent of 

the Unbanked and 52 percent of the Banked transfer money two or more times pe

month—the average amount transferred is significantly higher among the Banked.

The data also show that the Banked remitted more money than the Unbanked 

both phases of the survey and increased their remittance amounts over the period of 

the survey, despite suffering job loss. Specifically, the Banked remitted on average

$210/month in the first phase and $261/month in the second. In contrast, the

average amount remitted by the Unbanked declined from $199/month to $181/month

over the survey interval.

figure 7 Remittanc

Among those in the ranks of the Unbanked who remit money to family overseas, nearly all wir

money through a money transfer shop. Among the Banked, 40 percent leave the bank to send thei

remittances. Both the Unbanked and Banked remit frequent

Most frequent method to send money to

family and friends

Frequency of remittance to family and 

friends

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Banked Remitters Unbanked Remitters Banked Unbanked

■ Wire through a U.S. Bank

■ Wire through Money Transfer Chains

■ At least Once every Two Weeks

■ Once a Month

■ Once every Two to Three Months

■ Once every Four to Six Months

■ Other

57%

40%

4%

96%

23%

18%

12%

43%

33%

33%

16%

9%9% 4%
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•	 Cash security is a significant concern for participants in the cash economy. Onefifth (19 percent) of the unbanked population transact in cash whenever possible. Th

preference for the cash economy is slightly down compared to the first phase of the 

survey (29 percent). Close to one-fifth (18 percent) of individuals who rely on the cash

economy have been victims of cash loss, whether by theft, damage or loss. Nearly all of

these individuals have experienced a cash loss within the past year (90 percent) or within 

the past three years (98 percent). Among the Unbanked who have experienced cas

loss, the average loss was $729, equal to nearly two weeks of the respondents’ average 

household expenses.
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DI

Assessing the Imact of

in the Fa of a Net Decli

In March 2009, the City of Los Angeles launched the Bak on LA campaign. The in

sought to move the working poor up the rungs of the economic ladder by building 

financial security through safe and affordable banking. For this effort, the City of Lo

Angeles relied on the model set by San Francisco and embraced by the US Conferen

of Mayors: partnering with banks and credit unions to offer and market low-cost checking

accounts to low-income households. While housed within the city, Bank o LA bu

a partnership by engaging foundations, the United Way of Los Angeles, the Fede

Reserve Bank of San Francisco, the FDIC and social science researchers.11 Ba

LA initially targeted four pilot neighborhoods: Vernon Central, Westlake Pico 

Pacoima and Boyle Heights. In the summer of 2010, during the second phase of our da

collection, the program expanded citywide.12

Our research suggests that Bank o LA helped low-income households in greater

Angeles to open and maintain bank accounts. The pilot neighborhoods experience

smaller overall net loss in banked respondents compared to control neighborhoods 

that were outside of Bank on LA’s initial operation. The net decline in banking in 

control neighborhoods is, on average, more than twice as large as the net decline in 

banking in the pilot neighborhoods. The net decline in banking by low-income families is

unfortunate, but Bank onLA appears to have stemmed the bleeding and to have help

move some households toward the financial mainstream.

Success in promoting banking also appears to correlate with employment. Unemployment

is high in all eight neighborhoods in our survey and increased over the past year in six of 

the eight neighborhoods. However, the neighborhoods with the best employment figures 

showed the most traction in opening bank accounts. Vernon Central and Lincoln Height

the neighborhoods with the lowest rates of unemployment, held steady in their banking 

figures. In sharp contrast, Watts and Baldwin Village, the neighborhoods with the high

rates of overall unemployment, experienced the greatest net loss in banking. Overall,

the control neighborhoods experienced greater unemployment than neighborhoods 

that Bank onLA targeted, and more residents in the control areas gave up their ba

accounts. Because Bank o LA is integrated into other municipal poverty alleviat

programs, these findings may reflect the activity of such programs in the targeted pilot 

neighborhoods. Conversely, these findings could indicate that integrating programs like

Bank onLA into jobs programs may provide an effective avenue for increasing banki

among the working poor.

Our findings on the Bank o LA pilot suggest that an outreach effort needs to be 

as a vigorous and explicit campaign to maximize the goal of connecting underserved 

populations with low-cost bank accounts. Bank onLA suffers from low brand awareness
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More than half of the Unbanked received some sort of literature encouraging the

to open a bank account, but only 9 percent were aware of Bank onLA by name. O

positive note, the Newly Banked is the group that reports the highest rate of awarenes

of Bank onLA (13 percent), an indication the program may have had some success. Br

awareness matters because Bank onLA promotes each participant bank’s account that 

best able to support new entrants to banking. If new entrants to banking do not ask for

and receive the Bank onLA starter account, the efforts to move low-income househol

into the financial mainstream may be undermined by bank accounts with hidden and 

unexpected fees. Thus, while low-income households may have begun to hear more

about banking opportunities, the message was not necessarily linked to the Bank on

brand and did not carry the same assurances of a safe, low-cost starter account that the 

program is designed to provide.

Bank onLA also faced structural challenges. The nearly 10 million people in Los An

County are spread across an expansive geography, and the neighborhoods targeted

by the campaign are diverse in culture, history and infrastructure.14 Local efforts may

reasonably seek to reach all the targeted residents of a city, but the structure of the Los

Angeles municipal area renders it a difficult place to organize

Bank onLA is not a freestanding campaign with dedicated funding and political suppor

The program is contained within the City of Los Angeles Community Develo

Department and integrated into existing contracts with nonprofit agencies providing

services funded by the city. Further, unlike San Francisco, the City of Los Angeles did n

leverage its position as a major employer, depositor and investor to encourage banks to 

engage with low-income communities.15 Integrating the message of Bank o LA into c

contracts may provide deeper institutional support than a targeted but temporary and 

politicized public campaign could offer, and may take advantage of existing channels to 

deliver this new service. However, this structure may also have further buried the brand 

awareness of Bank onLA and reduced potential benefits of a more visible campaign

Identifying and Overcoming Brriers to 

Banked and Using Accoun

Our survey finds that working poor households in Los Angeles face barriers to banki

at each step of the way. These families struggle to open bank accounts, keep those

accounts open in times of economic distress, and fully and effectively utilize banking 

services. Costly overdraft andATM fees, regular use of alternative financial services 

the growth in the number of the Newly Unbanked indicate that the Banked in these lowincome communities face persistent barriers to effectively and beneficially using the

bank accounts. Thus, strategies that address only barriers to entry are unlikely to yield

long-term results.
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Barriers to Entry

The barriers to entering banking remain high. Most unbanked individuals in the lowincome neighborhoods of Los Angeles have never had a bank account. The majo

of unbanked individuals report they do not have enough money to meet the minimum 

balance required to open an account. Even for those households with a bank account,

banks too often fail to offer at reasonable prices the basic products sought by this 

population. Finally, a perception that banks charge excessive and hidden fees further 

dissuades unbanked individuals from beginning a banking relationship.

The median minimum balance required to open a checking account at the six largest

banks in California, encompassing 63 percent of total deposits in the state, is $50.17 Th

working poor struggle to tie up this amount of cash and therefore often turn to costly 

transactions with AFS providers to meet their daily financial services needs. By lowerin

minimum balance requirements, providing mechanisms for new account holders to 

reach these thresholds incrementally or waiving balance requirements for customers with 

a minimum direct deposit, banks likely would be able to recruit more customers from 

working, multi-earner households that use a broad range of financial products.

By encouraging the use of direct deposit among employees, employers can help steer

families toward banking and enable employees to take advantage of account features 

that waive minimum balance requirements and reduce fees for accounts paired with 

direct deposit.18 Promotion of direct deposit by employers, including state and local

governments, and by banks could move more working families into banking, enhance 

economic security and save workers hundreds of dollars each year in check-cashing 

fees. Our survey finds that although the vast majority of family income comes from

employment, only 15 percent of respondents are paid by direct deposit, which, by 

definition, requires a bank account or a prepaid card. Two-thirds (68 percent) of working

respondents receive paper checks.

As with direct deposit from employers, direct deposit from public programs can move

families toward banking by helping low-income families avoid monthly fees and meet 

the minimum opening balance requirements. Only 11 percent of recipients of public

assistance in our survey obtain their benefits via direct deposit into a bank account. In

contrast, 38 percent of respondents receiving this assistance do so via electronic benefit 

transfer (EBT). These individuals receive their public assistance via a debit card similar t

bank card but not tied to a general checking account. Utilizing the debit card reduces the

risk of cash loss and may encourage comfort with the banking system, but may include 

costly fees and may not provide the full benefits of a federally regulated and insured bank 

account.19 To the extent that state law and practice steer recipients of public assistance

away from direct deposit and bank accounts into a system that is less regulated and has 

less capacity for building savings and credit, it may undercut the goal of helping lowincome families join the financial mainstream.
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The survey population is largely foreign born.20 Although financial institutions have the lega

authority to accept identification issued by foreign governments, 14 percent of unbanked 

individuals cite the lack of proper identification as a reason for not having a checking or 

savings account. The persistence of lack of identification as a barrier to opening a bank

account may be due to fear among foreign-born populations that the requirements of 

banking will make them vulnerable to deportation, lack of information about the ability to 

open accounts with alternative identification cards, such as the Mexican Matrícula Consula

and refusal on the part of banks to accept such forms of identification.

More than half of respondents report that an important factor in their choice of a bank is

if a specific bank shows respect for their culture. Eighty-one percent of respondents took

our survey in Spanish, including 85 percent of the Unbanked. To thrive in the low-incom

neighborhoods of Los Angeles, banks and credit unions need Spanish-speaking staff

transaction materials in Spanish and a welcoming approach to the Latino population

Finally, the lack of familiarity with the banking system reported by many of the 

Unbanked signals a need for the use of neighborhood assets and trusted advisers

and calls for the public support of local leaders to communicate a message about 

safe banking opportunities.  successful community outreach plan might capitalize on

neighborhood assets to spread the news about the availability of low-cost accounts, 

banking institutions that will work with the target population and the acceptance of 

alternative forms of identification.

Barriers to Maintenance

Overcoming the barriers to joining banking is a significant achievement, but only the

beginning. At the close of our survey, the number of the Newly Unbanked exceed

the number of the Newly Banked, despite local efforts to promote banking. Th

suggests there is a strong need to address barriers faced by low-income communities to 

maintaining a bank account as well as the barriers to getting one.

Our survey illuminates the economic fragility of these families: half of the Newl

Unbanked report losing their job between survey phases, and a quarter of the Newl

Unbanked cite the loss of a job or lack of funds as the reason for dropping their accounts.

The median duration of a bank account that has been recently closed was three years.

Those who close these accounts are not recent arrivals to banking. Rather, they ar

established but economically vulnerable banking customers who run into financial barriers 

and hidden fees that push them out of the banking system.

The reason most often given for dropping out of banking was hidden and unexpected

fees, followed by loss of a job or lack of funds. In other words, bank fees have a more

detrimental impact on the ability of working poor families to keep a bank account than an 

event generally considered to be one of the greatest economic shocks to a household: 

job loss. One-third of newly unbanked individuals cite unexpected or unexplained fees as

their reason for becoming unbanked.
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Account closure due to fees appears to stem from the lack of transparency by banks

about fee structures. Low-income populations with low high-school graduation rates may

have a particularly hard time understanding even basic checking account fees when they 

are buried within the median 111 pages of a checking account disclosure statement.21 

Low-income customers are also less able to avoid basic banking fees. Many ban

accounts waive monthly maintenance fees when the account holder utilizes the direct 

deposit option. With low rates of direct deposit, however, the low-income population

in Los Angeles largely misses out on this opportunity to avoid the basic monthly fee

associated with banking.

For this population, the cost of overdraft fees is amplified by successive overdrafts or 

inability to repay overdrafts in the time before a second fee is assessed for the same 

transaction. Nearly two-thirds of banked respondents who overdrafted their accounts

incurred multiple fees as a result. Lack of clarity about overdraft options and hidden

bank practices that maximize overdraft fees hit this group especially hard and can 

discourage banking.22

This tenuously banked population also incurs unduly high fees due to their regular use of

out-of-network ATMs. All banked respondents use out-of-network ATMs an aver

once per month, and for those reporting any usage, they average 3.6 times per month. 

The cause of costlyATM use is unclear. The survey population may not fully unders

the costs associated with using out-of-network ATMs, or banks may not support adequa

ATM infrastructures in low-income neighborhoo

Once these barriers are overcome, newly banked customers report high levels of

satisfaction. Individuals who decided to begin a banking relationship perceived banks

positively and were sufficiently prepared to open an account. Further, banks and credit 

unions, in the short run, have not disappointed their new customers. This satisfaction

presents a ripe opportunity for banks to engage with new customers, build relationships 

and expand relevant offerings.

Barriers to Effective Usage

Low-income customers who have a bank account continue to make use of AFS provider

in part because of “convenience.” For proximity to home or work, customer service, 

prices and language accommodation, banks and credit unions receive significantly higher 

ratings by crossover customers than do check cashers. However, low-income customers 

point to two components of “convenience” that AFS providers offer that they view as

better than what they can get at banks.

One nuanced conception of convenience is the availability of a comprehensive suite of

products, and the other is confidence in the timing of transactions. Our survey finds that

crossover customers using check cashers most often do so because they can purchase 

several services at the same time. Customers also report that they can pay bills faster by

way of a check casher. Crossover customers who cash checks through AFS report tha
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they choose AFS due to concerns about liquidity and timing of deposit posting. Ban

deposit delays prompt banked customers to utilize AFS for check cashing. Moreover

transaction reordering by banks results in multiple overdrafts with high overdraft fees for 

these customers.23 By using check cashers, low-income customers seek to avoid these

costs and uncertainty.

Our survey indicates that this demographic would use four to six revenue-generating

transactions each month, services that low-income households currently purchase from 

AFS providers. For example, four in ten banked customers who also use AFS report havin

bills that require a money order. This is a common bill-paying practice in low-income

neighborhoods where landlords and other creditors refuse to accept personal checks. The

foreign-born population also commonly utilizes remittances. Still, only 17 percent of banked 

respondents report that they would use a bank or credit union to send a remittance or 

money transfer. Most make these transactions using check-cashing services

As with overcoming barriers to entering banking, the form of payment by employers

to workers and of government benefits can encourage more effective usage of a bank 

account. Because direct deposit generally requires workers to have a bank account,

employers and benefit providers that offer it can create incentives for the working poor 

to open and maintain checking accounts. Direct deposit also encourages the use of

automatic savings plans and helps account holders avoid costly check-cashing fees, 

improve liquidity, and assuage concerns about the timing of deposits and payments. 

However, the increasing use of prepaid cards as an alternative to checking accounts 

presents both an opportunity for and a challenge to banks to respond to innovations in 

payment systems.24

Finally, underlying the conversation about successive barriers to banking is the finding 

that the population in our survey is part of the working poor. Among survey respondents,

91 percent of family income comes from employment. Further, 43 percent of households 

saw their total household income drop in the past year. As low-income working families,

these households are economically vulnerable. By limiting opportunities to build capital

and by making consumer financial products expensive, the characteristics of the local 

financial services infrastructure exacerbate that vulnerability.

Banking Is Associated with Greater F

and Asset-Build

For families in the low-income communities of Los Angeles, banking is associated wit

spending less on financial services, greater use of savings, including remittances, and 

lower risk of cash loss.25 Banked and unbanked households report similar declines in

household income between phases of our survey, but the Banked are keeping their heads

just above water, while the financial condition of the Unbanked slips further

As previously unbanked families begin to rely on banking services, thereby reducing the

vulnerabilities associated with the cash economy and avoiding high fees of alternative 
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financial services, they begin saving money. Our comparison of the costs of using bank

services compared to AFS services in these study neighborhoods showed that purchasing

the financial services from AFS providers consumed 6 percent of an average household’s

income, while purchasing the same services at a bank represented half a percent—an 

order of magnitude difference. The funds spent on AFS can be saved.

The savings behaviors associated with banking allow families to smooth household

finances during times of economic turbulence. Nearly as many banked as unbanked

respondents saw their household income decrease in the past year, but the Banked

continue to report better overall financial situations compared to the Unbanked.

Household savings help staunch the outward flow of capital from low-income communities, 

enabling the development of assets for family and individual aspirations.

Our survey indicates that the Banked actively use available savings mechanisms: almos

all banked individuals keep some of their extra money in a bank account, and nearly 

as many hold at least one savings account. Indeed, in Phas II of the study, the Ba

report saving more often than they did in Phase I. They saved more than the Unbanked

both survey phases despite similar rates of job attrition and declines in household income 

for both groups. The underlying economic circumstances of these low-income families

remain a critical determinant of their ability to regularly save, but those that can afford to 

save report doing so.

Because the vast majority of our survey population relies on earned income, being

banked opens a portal to government programs to support the working poor. The

Banked are far more likely than the Unbanked to file tax returns and benefit from th

Earned Income Tax Credit (EITC). Supplementing the income of low-wage 

through a refundable tax credit, the ITC is one of the most significant poverty alleviat

programs for working families in the United States. In tax year 2006, th EITC ret

approximately $1.5 billion to families in Los Angeles County.27 Our research found t

close to three-quarters (72 percent) of respondents who filed taxes received a refund, 

with many of these including ITC payments. More than two-thirds (68 percent) of

Banked filed their 2009 tax returns; only 38 percent of the Unbanked did so. Amo

low-income residents of Los Angeles, having a bank account improves the likelihood o

obtaining the ITC payment and its significant financial bene

Financial security and banking are deeply tied to aspiration and economic mobility. 

Families that save report designating their savings for long-term goals, including 

education, home ownership and retirement. In the short term, having a savings account

facilitates greater financial stability, enabling families to keep their heads above water in 

declining economic times.
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CONC

There is a role for banks, government, community groups, employers and consumers

in making sure everybody has the opportunity to participate fully in the financial 

mainstream. Financial institutions can enable families to bank and save as productive 

clients by offering accounts with low minimum opening balance requirements, reasonable 

and transparent fees, and a comprehensive suite of financial products that meet the 

needs of low- and moderate-income families. To help families stay banked, banks should

adopt neutral and objective transaction sequencing that is not designed to maximize 

overdraft penalties. Local governments and financial institutions can work with community

groups to improve access to banking with a vigorous and sustained effort.  sound

marketing plan can ensure that new entrants to banking receive the benefits of safe and 

affordable bank accounts. In order for families to stay banked, banks and local leaders

should address not only the barriers to opening a bank account but also the obstacles 

that cause households to leave banking or to not develop a full banking relationship that 

includes building savings. Finally, employers and benefit providers, starting with state 

and local governments, should promote direct deposit to help employees and benefit 

recipients begin banking and stay banked.
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RECOM

Overcoming Barrirs t

•	 Employers and government agencies can offer direct deposit to workers and

recipients of public assistance. 

Direct deposit can alleviate the burden of monthly fees and minimum opening balance

requirements, making checking accounts more affordable to open and maintain. 

Employers, beginning with state and local governments, can increase the use of direct

deposit as a way of encouraging low-income workers to open and maintain bank 

accounts. Government offices providing public benefits payments should do the same

for recipients of public assistance. Prepaid payroll and benefit cards, while a convenient

transaction tool, do not offer the same opportunities to build savings and credit as direct 

deposit to a bank account does.

•	 Government workforce placement programs can introduce bank accounts to the

newly employed.

Economic circumstances and employment are the most important factors in determining

a person’s “bankability.” Half of the Newly Unbanked in our survey are also newl

unemployed, and many more of the Unbanked are not making enough money to

maintain a bank account. The linkage between neighborhood employment rates and

success in opening new bank accounts affirms the recommendation that new bank 

accounts should be introduced as people become employed. Government workforce

placement programs and private employers can both play a role here.

•	 Policy makers and the banking sector can use public–private collaborations to

reach the Unbanked and to set safe terms for starter accounts.

Local governments and the banking sector should reduce barriers to entry through

collaborations that make low-cost bank accounts available and that actively market them. 

These accounts should have a low minimum balance requirement and include a fair and

transparent fee structure. Banks should couple these accounts with an offering of the

other financial products sought by the low-income population, including remittances 

and money orders. Federal policies, local government practices, and partnerships 

that include local civic leaders and banks can encourage banks to maintain branch 

offices in low-income communities, hire staff fluent in prominent local languages and 

actively participate in the relationships necessary to build community comfort with the 

mainstream financial system. City leaders can offer their vigorous and sustained support

for these campaigns.
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•	 Banks and efforts to bank the Unbanked can engage in marketing and outreach i

locally spoken languages.

Active marketing and community outreach, as well as financial education, are essential

to reach a community often lacking comfort or familiarity with the banking system. 

Additionally, Bank o LA and similar publicly supported efforts can be clearly branded

help ensure that people get into the specifically designed Bank onLA starter account

To effectively market safer banking opportunities and reach out to the target population,

all of these activities can be carried out in languages spoken by the target population.

Helping Families Sta

•	 Policy makers can require, and banks should implement, fair and transparent fees

Policy makers should require banks to provide information about checking account

terms, conditions and fees in a concise, easy-to-read format, similar to the Schumer box 

for credit cards.28 Failing to do so can lead to unexpected fees that our data shows can 

trigger low-income customers to drop out of the banking system. Given the high rate of

overdraft transactions revealed in our survey, combined with the frequency at which the 

Newly Unbanked express deep dissatisfaction with unexpected fees, banks should revie

overdraft penalty fees and implement strategies to reduce their size and frequency. 

Moreover, they should provide full and transparent disclosure of customer options with

respect to overdraft plans (such as overdraft transfer or line of credit) as well as the choice 

to opt in or out of overdraft programs at any time.

•	 Banks and banking regulators can end deposit delay and require depository

institutions to post deposits and withdrawals in a fully disclosed, objective and 

neutral manner, such as chronological order, that does not maximize overdraft fees. 

Our survey indicates that low-income customers are particularly concerned about liquidity

and timing of their deposits and payments. Banks should post deposits and withdrawals

in a fully disclosed, objective and neutral manner that does not maximize overdraft fees.29

Banks should seek to make funds available as quickly as possible
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•	 Banks can increase their presence, including ATM networks, in low-income area

The use of out-of-network ATMs and accompanying fees reported in our survey lik

reflects poor TM infrastructure in the places where low-income customers live and wor

Banks and credit unions can reduce fees associated with banking by optimizing their

networks for these low-income areas. Policy makers, including local governments, can

take actions to encourage such improvements.

Encouraging the Buiding of Saving

•	 Banks can provide a comprehensive suite of products, including money orders,

remittances, check cashing, bill pay services and personal loans.

Banks can leverage their strengths in location and customer service to effectively

compete in the market for financial services utilized by low-income households. By

offering a cheaper alternative to AFS, banks can present their customers a significant

opportunity to save money even as banks capture this market for revenue-generating 

products and services. To do so, banks can provide at competitive and transparent prices

products used by working poor and foreign-born populations, including money orders, 

remittances, check cashing, bill pay services and personal loans.

•	 Community organizations, local governments, efforts to bank the Unbanked, like

the Bank On programs, and depository institutions can provide financial education

to help new customers manage costs and build up assets.

Financial education and asset-building strategies are necessary to connect customers, 

particularly those who are unfamiliar with the banking system, with banking products that 

fit their financial needs. Financial education can complement full-disclosure policies and 

transparent fee structures at banks. Given the high rates of out-of-networkATM usage

low-income customers, education programs should specifically address TM networ

•	 Banks, policy makers and community organizations can capitalize on household

aspirations to build family financial security.

Individuals who remain banked tend to actively save, including for long-term goals, such

as paying for a college education. Banks that provide low-cost and easy-to-understand

opportunities for savings and asset-building enable families to build economic security 

within the financial mainstream. Developing household assets and banking relationships

allows families to save and plan. Banks can be active partners in fostering these

opportunities.
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 Appendix: Method

This longitudinal study was designed to track the financial behaviors of low-income

households over time. The first phase of the survey was conducted from July 8, 2009,

to September 18, 2009, and the second phase nearly one year later from May 17, 2010,

to September 29, 2010. With the data that emerged from this two-phase survey, we

were able to analyze the financial evolution of the 2,000 tracked households across the 

economic turmoil of 2009 and 2010.

The initial panel of 2,000 respondents was drawn from eight neighborhoods located

throughout the City of Los Angeles. In Phase II, 1,455 respondents fro Phas

successfully contacted again, representing a 28 percent attrition rate. Respondents were

recruited to represent two specific subgroups: (a) 1,000 unbanked households, defined as 

those with no current bank account; (b) 1,000 banked households, defined as those with 

at least one bank account. In the first phase, the split between subgroups was essentially

equal with 1,021 unbanked households and 1,000 banked households. Attrition was slightly

greater among banked respondents; in Phase II, we surveyed 784 unbanked househol

and 671 banked households.

The neighborhoods selected for this study included four previously identified as targets

for the Bank onLA campaign and four additional neighborhoods with similar socioeconomic traits that were not targets of Bank on LA. While all eight neighborhoo

low-income, they are geographically and ethnically diverse, representing a variety of 

economic segments of Los Angeles. The study included areas with a history of redlini

and divestment, dynamic immigrant enclaves, underutilized urban spaces under pressure 

from gentrification and stable working-class communities. We attempted to select

communities that could provide not only a sample of low-income Los Angeles, but also 

sample of low-income populations across the country.

Respondents were screened and recruited through a door-to-door, interviewer-administered

survey with the households selected by random location sampling. Proportional quotas

were determined for each of the eight target neighborhood geographies based on the 

broader sample quota of 1,000 banked households and 1,000 unbanked households. 

Each neighborhood was further subdivided according to census block group quotas

using weighted census data. Individual quotas per block group were assigned via a

Geographic Information Systems process based on the percentage of each block grou

within the total population of the census tracts in the neighborhood.

Three households per block were randomly selected as possible starting points. I

qualified respondents were not available at the first household, the second household 

was approached, followed by the third household, if necessary. Upon the successful

screening and recruitment of a household, interviewers approached other households on 

the block, skipping a specific number of homes, based on the block’s population size and 

target quota. Local city officials assisted field researchers to obtain safe access to large

public housing projects and arranged a secure location within the building for interviews. 
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Data collection for Phas II of the survey was administered by both telephone and inperson intervi

Field researchers were instructed to request the participation of the head of the 

household or individuals responsible for household financial decisions. If the relevant

individuals were not available, the interviewers returned at a different time. Once deemed

eligible, respondents were recruited into the panel and immediately administered the 

PhaseI questionnaire. Interviews were attempted at various times throughout the da

including during both peak and off-peak employment hours, to ensure comprehensive 

representation. Field staff reflected the ethnic and racial backgrounds of the target 

areas’ demographics. Because the population of these neighborhoods is heavily

Latino, most interviewers were fluent in both Spanish and English; all interviews wer

conducted in the respondents’ language of choice.  total incentive of $75 was offered

to each participating respondent, distributed through the two phases: $30 was offered 

immediately following PhaseI interviews and the remaining $45 upon the successfu

completion of PhaseII intervie

The survey involved between 70 and 150 questions, depending on the respondent’s

answers and financial behaviors. Almost all questions were closed-ended, multiple-choice

questions. The interviews lasted between 30 and 60 minutes. For Phase II, the sur

instrument was revised slightly to refine questions with ambiguous results. The survey

instrument for both phases is available upon request.
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Endno

1 Federal Deposit Insurance Corporatio

National Survey of Unbanked and Underbanked 

Households (2009). Throughout this report, as in

Unbanked by Choice, the word “bank” is used 

to refer to regulated depository institutions, 

including banks, credit unions, and thrifts. In fact,

banked respondents in our survey overwhelmingly 

use banks. See, Pew Health Group, Unbanked b

Choice: A Look at How Low-Income Los Angeles 

Households Manage the Money They Earn (The

Pew Charitable Trusts, 201

2 Bank onLA is a city-led effort to promote banki

among low-income communities. The City of L

Angeles partners with banks and local nonprofits

to promote low-cost bank accounts. In its initial

phase, Bank onLA targeted four neighborhoo

with a high percentage of unbanked households. 

To measure the success of the program and

expand the breadth of our survey, we added 

to the study four additional neighborhoods 

with similar socio-economic traits as the pilot 

neighborhood but which were not targeted by 

Bank on 

3 Pew Health Group, Unbanked by Choice: A Loo

at How Low-Income Los Angeles Households 

Manage the Money They Earn (The Pe

Charitable Trusts, 2010

4 Identification as Hispanic/Latino is slightly les

frequent among the Newly Unbanked (76 percent

than the overall survey population (86 percent). 

The Newly Unbanked are less financially secu

than the overall survey population. Most of the

Newly Unbanked have household incomes o

less than $15,000 per year (71 percent), while 

56 percent of the overall survey population 

report this level of household income. Half 

(50 percent) of the Newly Unbanked have suffere

a decrease in household income in the past year, 

slightly more than the 43 percent of the overall 

survey population reporting such a decline.

5 Newly unbanked respondents were asked why

they chose to close their bank account(s) and 

offered nine answer options, among them “other” 

and “none of the above.” Other answer options

to the survey question were “Upset Over Som

Fees You Were Charged,” “Upset Over the B

Customer Service,” “Credit Was Reduced

Denied,” “Bank Stopped Supporting My Cult

or Community,” “Bank Was Taken Ove

Another Bank,” “Didn’t Have Money” and “

Job/Unemployed.

6 The four control neighborhoods in our study were

selected for their socio-economic similarity to the

four neighborhoods selected for initial targeting 

by Bank on LA. All eight neighborhoods 

low-income, but otherwise are geographically, 

ethnically and historically diverse. Further 

information about the control neighborhoods 

and our methodology is available in Unbanked by 

Choice.

7 Among the largest banks in California, the media

minimum balance required to open a checking 

account is $50. Nationally, the median minimum

opening balance is $100, indicating that this 

barrier may be even more significant in other 

parts of the country. Pew Health Group, Hidde

Risks: The Case for Safe and Transparent Checking 

Accounts (The Pew Charitable Trusts, 20

8 ChexSystems is a consumer reporting agency that

provides banks with reports on account applicants 

who have a history of mishandling bank accounts.

9 Claes Bell, “Banks Taking a Bigger Bite

Fees,” in 2010 Checking Study, Bankrate.com

(2010), available at www.bankrate.com/finance/

checking/bankrate-s-2010-checking-study.aspx.

10 In 2011, the federal poverty line for a family of four

is $22,350. The 2011 U.S. Department of Heal

and Human Services Poverty Guidelines, availabl

at aspe.hhs.gov/poverty/11poverty.shtml.

11 Manuel Pastor, Banking on LA (2009)

www.bankonla.org/aboutus/index.htm.

12 Our survey was conducted as the Bank o

LA program expanded. Because the form 

outreach utilized by Bank on LA—inclusion in ci

contracts for services targeting the working poor 

and distribution through grassroots networks—

involved a period of transition and then organic 

growth, we believe that the distinctions between 

the control and pilot neighborhoods are relevant.
30 slipping behind

Low-Income Los Angeles Households Drift Further from the Financial Mainstream

www.pewtrusts.org/safebanking

13 The low levels of brand awareness likely stem

from the way Bank onLA marketed itself. 

City of Los Angeles received pro bono marketi

design services from McCann Erickson, the sa

firm responsible for the Bank On San Francisc

campaign that reported higher levels of brand 

awareness. However, the initial planning for 

a public outreach campaign in Los Angele

coincided with the widespread collapse of banks 

in autumn 2008 during the financial meltdown. 

Turbulence in the financial sector jeopardized

program funding from banks and prompted 

city leaders to reevaluate ambitious public 

marketing campaigns, such as those seen in 

San Francisco. Instead, Bank o LA pursue

grassroots outreach campaign by distributing 

postcards and relying on existing community 

networks to spread the word about banking. See

Anne Stuhldreher and Leigh Phillips, Buildi

Better Bank Ons: Top 10 Lessons from Bank On 

San Francisco (New America Foundation, 2011)

available at newamerica.net/publications/policy/

building_better_bank_ons.

14 United States Census Bureau, Los Angeles Co

California

15 Anne Stuhldreher and Leigh Phillips, Buildi

Better Bank Ons: Top 10 Lessons from Bank On 

San Francisco (New America Foundation, 2011)

available at newamerica.net/publications/policy/

building_better_bank_ons.

16 Corporation for Enterprise Developmen

Building Economic Security in America’s 

Cities: New Municipal Strategies for Asset 

Building and Financial Empowerment (2011), 

available at cfed.org/knowledge_center/

publications/savings_financial_security/

building_economic_security_in_americas_cities.

17 Pew Health Group, Hidden Risks: The Case fo

Safe and Transparent Checking Accounts (The Pe

Charitable Trusts, 2011

18 Ibid

19 See, for example, National Consumer Law Cent

Unemployment Compensation Prepaid Car

States Can Deal Workers a Winning Hand by 

Discarding Junk Fees ( 2011), available at www.

nclc.org/images/pdf/pr-reports/uc-prepaid-cardreport.pdf.

20 Further details about the demographics of the 

survey population are available in Unbanked by 

Choice: A Look at How Low-Income Los Angeles 

Households Manage the Money They Earn (The

Pew Charitable Trusts, 201

21 Pew Health Group, Hidden Risks: The Case fo

Safe and Transparent Checking Accounts (The Pe

Charitable Trusts, 2011

22 For a discussion of transaction order, see Pew

Health Group, Hidden Risks: The Case for Safe

and Transparent Checking Accounts (The Pe

Charitable Trusts, 2011

23 Ibid

24 Federal Reserve data show that in 2009 over $140

billion in transactions were made using prepaid 

products; see 76 Fed. Reg. 43394, 43395

25 In 2008, we found that California household

without a bank account spend approximately 

$1 billion every year on check-cashing and bill 

pay services. Pew Health Group, Convertin

Basic Financial Service Fees into Prosperity: An 

Untapped Opportunity for Consumers and Banks 

(The Pew Charitable Trusts, 20

26 Pew Health Group, Converting Basic Financia

Service Fees into Prosperity: An Untapped 

Opportunity for Consumers and Banks (The Pe

Charitable Trusts, 2008

27 Edmund Khashadourian, Joseph Martin

and Bill Pitkin, The Earned Income Tax Credi

in Los Angeles: Trends and Opportunities 

(Center for Community Research and Solution

2008), available at www.unitedwayla.org/

getinformed/rr/research/financial/Documents

EITCbriefVersion1
slipping behind 31

Low-Income Los Angeles Households Drift Further from the Financial Mainstream

www.pewtrusts.org/safebanking

28 For further details on fair and transparent fee 

structures and disclosures, see Pew Health Group

Hidden Risks: The Case for Safe and Transparent 

Checking Accounts (The Pew Charitable Trus

2011).

29 For further details on transaction sequencing, see

Pew Health Group, Hidden Risks: The Case fo

Safe and Transparent Checking Accounts (The Pe

Charitable Trusts, 2011
32 slipping behind

Low-Income Los Angeles Households Drift Further from the Financial Mainstream

www.pewtrusts.org/safebanking

The analysis included in this report is solely that of The Pew Charitable Trusts and does not necessarily 

reflect the views of outside reviewers. This report is intended for educational and informative purposes. 

References to specific policy makers, programs or companies have been included solely to advance 

these purposes and do not constitute an endorsement, sponsorship or recommendation.

Acknowledgm

The project team would like to thank the following individuals for their careful and critical reading of this report

Mark Baldassa

President and Chief Executive Officer

Public Policy Institute of California

Manuel Past

Professor, American Studies and Ethnicity 

Director, Program for Environmental and Regional Equity 

University of Southern California

Shelley A. Hear

Managing Director 

Pew Health Group

Additionally, we would like to thank our Pew colleagues—Ivan Amato, Nick Bourke, Lisa Go

Nicolle Grayson, Ardie Hollifield, Alex Horowitz, Glen Howard, Leah Libresco, Julia Moore, 

Ochylski and Susan Weinstock—for their support in readying this report for publication. We thank El

Constantine, former director of the Financial Security Portfolio, for driving the early phases of this report

Projec

Los Angeles T

Daniel Tellalia

Emerging Markets, Inc.

Thomas Tseng

New American Dimensions

Pew Health

Eleanor Blu

Pew Health Group

The Pew Safe Banking Opportunities Project, a two-year initiative, develops standards for s

affordable, fair and empowering bank accounts, promotes their voluntary adoption by banks and credit 

unions, and educates the public about the standards.

For more information, see www.pewtrusts.org/safebanking.

901  Street

Washington,DC 20

T: 202.552.200

Pew Health Group is the health and consumer-product 

safety arm of The Pew Charitable Trusts, a nonprofit 

organization that applies a rigorous, analytical approach 

to improve public policy, inform the public and stimulate 

civic life.
October 2011

www.pewtrusts.org/safebanking