Banking and Credit

Most adults had a bank account and were able to obtain credit from mainstream sources in 2019, but notable gaps in access to basic financial services still exist among minorities and those with low income. On average, individuals with capacity to borrow on a credit card were more prepared for financial disruptions.

Unbanked and Underbanked

Although the majority of U.S. adults had a bank account and relied on traditional banks or credit unions to meet their banking needs, gaps in banking access remained. Six percent of adults in 2019 did not have a checking, savings, or money market account (often referred to as the "unbanked"). Half of unbanked adults used some form of alternative financial service during 2019—such as a money order, check cashing service, pawn shop loan, auto title loan, payday loan, paycheck advance, or tax refund advance. In addition, 16 percent of adults were "underbanked": they had a bank account but also used an alternative financial service product (figure 18).26 The remaining 79 percent of adults were fully banked, with a bank account and no use of alternative financial products.

Figure 18. Banking status
Figure 18. Banking status
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Note: Fully banked individuals had a bank or credit union account and had not used an alternative financial service in the past year.

The unbanked and underbanked were more likely to have low income, have less education, or be in a racial or ethnic minority group. Fourteen percent of those with incomes below $40,000 were unbanked, versus 1 percent of those with incomes over that threshold. Additionally, 14 percent of black adults and 10 percent of Hispanic adults were unbanked, versus 6 percent of adults overall (table 10).

Table 10. Banking status (by family income, education, and race/ethnicity)

Percent

Characteristic Unbanked Underbanked Fully banked
Family income
Less than $40,000 14 23 63
$40,000–$100,000 1 16 83
Greater than $100,000 * 6 94
Education
High school degree or less 12 21 67
Some college/technical or associate degree 3 17 79
Bachelor's degree or more 1 9 90
Race/ethnicity
White 3 11 86
Black 14 32 54
Hispanic 10 22 68
Overall 6 16 79

* Less than 1 percent.

Those who used alternative financial services (around one in five adults) may have needed or preferred to conduct certain financial transactions through providers other than traditional banks and credit unions. The vast majority (88 percent) of people using alternative financial services used transaction services such as purchasing a money order or cashing a check at a place other than a bank (table 11). Twenty-nine percent borrowed money using an alternative financial service product, including payday loans or paycheck advances, pawn shop or auto title loans, and tax refund advances.

Table 11. Forms of alternative financial services used

Percent

Service type Among those using any alternative financial services Among adult population
Transaction services
Money order, not from a bank 66 12
Cash a check, not at a bank 41 8
Any transaction service 88 16
Borrowing services
Payday loan or paycheck advance 15 3
Pawn shop or auto title loan 14 3
Tax refund advance 7 1
Any borrowing service 29 5

Note: Respondents could select multiple answers.

Credit Outcomes and Perceptions

The majority of U.S. adults who applied for credit in 2019 were able to obtain it, but a sizable share reported barriers or limitations to borrowing. During 2019, 41 percent of adults applied for some type of credit. Of those who applied for credit, 24 percent were denied at least once in the year before the survey, and 31 percent were either denied or offered less credit than they requested.

The incidence of denial or limitations on credit differed by the family income of the applicants and by their race and ethnicity. Lower-income individuals were substantially more likely to experience adverse outcomes with their credit applications than those with higher incomes. Among applicants with incomes under $40,000, 43 percent were denied credit, versus 9 percent of applicants with incomes over $100,000. Within each income bracket, black and Hispanic individuals were more likely to report an adverse credit outcome (table 12).

Table 12. Credit applicants with adverse credit outcomes (by family income and race/ethnicity)

Percent

Characteristic Denied Denied or approved for less than requested
Less than $40,000
White 40 48
Black 58 68
Hispanic 41 49
Overall 43 51
$40,000–$100,000
White 17 22
Black 41 57
Hispanic 30 39
Overall 22 29
Greater than $100,000
White 7 10
Black 19 31
Hispanic 17 22
Overall 9 13
All incomes
White 19 24
Black 44 57
Hispanic 32 40
Overall 24 31

Note: Among adults who applied for some form of credit in the past 12 months.

Negative perceptions may be an additional barrier to credit. More than 1 in 10 adults put off at least one credit application because they thought that their application would be denied. This included 8 percent who applied for some credit, but opted against submitting additional applications because they thought they might be turned down, and 4 percent who desired credit but did not apply at all for fear of denial.

Although some people forgo credit applications because they expect a denial, most adults (80 percent) were somewhat or very confident that they could obtain a credit card if they were to apply for one (figure 19). Black and Hispanic adults were less confident that their credit card application would be approved, relative to adults overall.

Figure 19. Confidence that a credit card application would be approved (by race/ethnicity)
Figure 19. Confidence that a credit card application would be approved (by race/ethnicity)
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Note: Key identifies bars in order from left to right.

While those with higher incomes were substantially more confident about being approved for credit than those with lower incomes, differences in confidence across racial and ethnic groups were evident at all income levels (table 13). However, these gaps may have been at least partially attributable to other factors related to creditworthiness that vary by race.27

Table 13. Confidence that a credit card application would be approved (by family income and race/ethnicity)

Percent

Characteristic Very confident Somewhat confident Not confident or don't know
Less than $40,000
White 41 24 34
Black 24 25 50
Hispanic 31 28 42
Overall 36 25 39
$40,000–$100,000
White 74 16 10
Black 47 27 26
Hispanic 55 27 18
Overall 68 19 13
Greater than $100,000
White 90 7 3
Black 74 21 5
Hispanic 77 15 8
Overall 87 9 4

Credit Cards

In people's financial lives, credit cards can serve different functions at different times. For people who pay their balances off each month, credit cards are mainly a form of payment convenience and can be thought of more or less the same as using cash. For those who carry a balance, however, use of the card represents borrowing and carries a cost in the interest payment and any fees that are incurred.

Overall, 83 percent of adults had at least one credit card, and the share with a credit card was higher among those with higher incomes, more education, or who are white (table 14). Among those with a card, 48 percent paid their credit card bill in full every month in the prior year. About one-quarter carried a balance once or some of the time in that year; the remaining one-quarter carried a balance most or all of the time (figure 20). The frequency of regular borrowing with credit cards during 2019 is similar to 2018.

Figure 20. Frequency of carrying a balance on one or more credit cards in the past 12 months
Figure 20. Frequency of carrying a balance on one or more credit cards in the past 12 months
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Note: Among adults with at least one credit card.

Table 14. Has at least one credit card (by family income, education, and race/ethnicity)
Characteristic Percent
Family income
Less than $40,000 63
$40,000–$100,000 92
Greater than $100,000 98
Education
High school degree or less 70
Some college/technical or associate degree 83
Bachelor's degree or more 95
Race/ethnicity
White 87
Black 69
Hispanic 75
Overall 83

On average, individuals with capacity to borrow on a credit card were more prepared for financial disruptions. Transactional users of credit cards who never carry a balance were much more likely to have said that they would pay an unexpected $400 expense with cash or its equivalent, compared to those who carry a balance most or all of the time or those who do not have a credit card (table 15). Similarly, transactional users were more likely to have a three-month rainy day savings fund and to express confidence that their application for a credit card would be approved.

Table 15. Financial preparedness measures among adults (by credit card use)

Percent

Card access and payment patterns Pay unexpected $400 expense with cash or equivalent Have 3-month rainy day savings fund Confident credit card application would be approved
Have a credit card, frequency of carrying balance
Never carried an unpaid balance 90 81 96
Once or some of the time 63 54 90
Most or all of the time 43 29 79
Do not have a credit card 27 18 33
Overall 63 53 80

Note: "Confident" includes people reporting that they were either very confident or somewhat confident. Frequency of carrying a balance is for the past 12 months.

 

References

 

 26. The FDIC National Survey of Unbanked and Underbanked Households in 2017 found that a similar 6.5 percent of households were unbanked and 18.7 percent of households were underbanked. However, the FDIC uses a broader underbanked definition, which includes international remittances and rent-to-own services as alternative financial services. See Federal Deposit Insurance Corporation, 2017 FDIC National Survey of Unbanked and Underbanked Households (Washington: Federal Deposit Insurance Corporation, October 2018), https://www.economicinclusion.gov/surveys/2017household/Return to text

 27. In a regression including income, age, presence of a credit card and card payment behavior, and self-reported credit score, the difference in confidence between black and white adults narrows but remains significant. The gap between Hispanic and white adults is largely accounted for by these other factors. Return to text

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Last Update: May 21, 2020