The Federal Deposit Insurance Corporation wants to cut down on the number of the unbanked and started a pilot program called “Safe Accounts.” The idea was to trial a type of bank accounts that are easier to open and have fewer fees and the initial study showed good results.
Safe accounts pilot program wraps up
The Federal Deposit Insurance Corporation, according to Time magazine, hatched a plan to woo the unbanked over to the dark side and turn them into the demographic formerly known as the unbanked. The agency, the insurer for the banking industry, identified several things which might prevent some people from getting a bank account and designed an account, which they called a “Safe Account,” and got nine banks to offer them for a trial period, which began in 2011.
Safe Accounts are just like a regular bank account. They are card-based, like a modern checking account with a debit card, and customers use their cards are ATMs and for making purchases. However, the requirements and fees are a little less harsh. Minimum opening balances and monthly required balances are lower, and overdraft fees aren’t allowed.
Appears to have worked
The one-year program, according to the FDIC, had ended as of January 1 of this year and the results are promising. The accounts were offered at select branches of the nine banks that agreed to participate in the trial, according to BankTalk.com, in many cases to people that otherwise couldn’t have opened an account with those particular institutions.
The banks had to offer an FDIC Safe Accounts checking and/or savings account to customers with no overdraft fees, $1 per month minimum balance, online bill-pay, free automatic savings, electronic statements and had to be able to receive direct deposits. The monthly account fee couldn’t be higher than $3.
Over the one-year trial run, there were 662 checking accounts and 2,883 savings account opened. At the end of the year, according to the FDIC, 95 percent of the savings accounts and 81 percent of the checking accounts were still open. Overdrafts were less common than with traditional accounts, as was fraud.
The average monthly balance at the end of the trial year, according to Time, was $244.80.
Lots of unbanked people
Banks are, thanks to the modern financial system that revolves around credit, a necessary evil. One basically needs to have a bank account and banking history, which means that there’s practically no getting away from them. The unbanked or underbanked usually use alternative financial services, such as check cashers and short term loans lenders.
These accounts offer a chance for the unbanked and underbanked to get a bank account. They are estimated to make up roughly 7.7 percent percent of households in the U.S., or about 9 million households and 17 million adults. Given the relatively low incidence of overdraft, it’s thought that the Safe Accounts will be cheaper for banks to offer over time, but according to the FDIC, some of the participating institutions were confused as to how to market them.