Today, many Latinos living in the United States may be overpaying for financial services. According to a 2021 report from the Federal Deposit Insurance Corporation (FDIC), 24.1% of Hispanic households have limited access to banking services, meaning the household has a checking or savings account at a financial institution but has used other services (e.g., money orders, remittance transfers, check cashing) outside of their bank or credit union. Accessing additional services outside of a bank can be costly.
The FDIC report also found that 9.3 percent of Hispanic households are unbanked, meaning that no one in the household has a checking or savings account at a financial institution. Being unbanked can result in limited access to certain financial products and services, such as savings accounts that offer investment opportunities and insurance options.
To examine the cost Latinos may be paying to access financial services in the United States, Comun conducted an analysis comparing the cost if an individual were a customer of Comun versus a traditional financial institution. The study also examined the cost of not having access to banking services. In addition, Comun analyzed the cost of the three options over one year and how much an individual could save if they used a service like Comun for one year and over a five-year period.
*Note: Comun did not include the account opening fee in the total amount for the traditional bank, as we assumed that this user would not maintain the minimum balance requirements and, therefore, would incur a monthly fee of $12..
How much customers can save by using a service like Comun in a year:
Cost of a traditional bank account: $1,176
The cost of not being banked: $196
How much customers can save in five years by using a service like Comun:
Cost of traditional bank account: $5,881
The cost of being unbanked: $981
Additional comments
In addition to direct costs such as check cashing or money order fees, the unbanked also incur many indirect costs, such as:
- High borrowing costs: Without a bank account, accessing credit can be more complicated and costly. The unbanked may turn to alternative financial services, such as payday loans or pawnshops, which typically charge high interest rates and fees. Having a bank account and a good banking relationship can qualify people for lower interest loans and other credit products.
- Limited access to financial services: Being unbanked can result in limited access to certain financial services and products, such as savings accounts, investment opportunities and insurance options. This lack of access can hinder people's ability to build wealth and protect themselves financially over the long term.
- Security risks: Keeping cash at home can be risky, as it is vulnerable to theft, loss or damage. Bank accounts offer a secure way to store and access funds, reducing the risk of financial loss due to theft or other unforeseen circumstances.
Methodology
The analysis was conducted in April 2024 by Comun. The data examines the annual cost of using a service such as Comun, a traditional bank account, or being unbanked for financial services. In this analysis, we looked at the cost of a current account with a traditional financial institution as well as the cost of services outside of a financial institution and made these assumptions:
- A minimum balance to open an account
- Common Cost: $0
- Traditional financial institution cost: $100, this is based on the minimum balance required to open the referenced bank account.
- Monthly cost
- Cost of Communication: $0
- Cost of traditional financial institution: A monthly fee of $12, assuming the minimum daily balance of $1,500 is not met.
- Two cash deposits (ATM) per month
- Comun's cost: $0 for using a network ATM and $3.50 for using a retail partner to make a deposit. Comun assumed that a user makes two deposits per month, one at a retail store and one at an in-network ATM.
- Traditional financial institution fee: $2.50 for a deposit at another financial institution and $2.50 if using an out-of-network ATM. For the bank account analyzed in this report, there are no fees for cash deposits at branches. However, this bank charges $2.50 for deposits at other ATMs. The retail store will also charge the customer, which varies by location, but Comun assumed $2.50.
- Two remittance transfers per month
- Communication Fee: Customers can send remittances free of charge for the first month. After that, remittances carry a $2.99 fee.
- Cost of traditional financial institution: $45 to send international transfers in US dollars(source)
- For the unbanked, Comun assumed that the person sends remittances with Western Union, which costs $8 per transfer in flat fees if the user is depositing cash at a Western Union location in the United States and the recipient is withdrawing cash at a Western Union location in Mexico (source: fee calculator). Comun assumed 2 remittances per month for one year, and the first remittance at no cost (a promotion with Western Union).
- Check cashing fee
- We assume that a user cashes two checks per month and pays $4 each time ( Walmart's fee amount).
- Money order fee
- We assume that a user buys two money orders per month and pays $1 each time (the fee amount is from Walmart).