The importance of check-cashing businesses to the unbanked: racial/ethnic differences
The roughly 9.5 percent of all U.S. families that are without some type of transaction account (unbanked) are disproportionately represented by minorities. The unbanked often must rely on alternative ways to carry out basic financial transactions such as cashing payroll checks and paying bills. This study analyzes unique survey data and finds that a consumer's decision to patronize check-cashing businesses is jointly made with the decision to be unbanked. For the unbanked, these businesses are an important source for financial services. Attributes that contribute to these decisions, however, vary for each racial/ethnic group. Latent preference effects are also observed to influence this joint decision for Blacks and Hispanics. These findings may explain in part why the provisions of the Debt Collection Improvement Act (DCIA) of 1996 have not been more successful in bringing unbanked federal benefits recipients into the financial mainstream. ; Consumer participation in mainstream financial markets can improve their ability to build assets and create wealth, protect them from theft and discriminatory, predatory or unsavory lending practices, and may promote economic stability and vitality in the communities where they reside. By more fully understanding a consumer's financial decisions, policies can be better directed to improve the effectiveness of legislation such as the DCIA of 1996 in encouraging mainstream financial market participation.
|Date of creation:||2003|
|Contact details of provider:|| Postal: P.O. Box 834, 230 South LaSalle Street, Chicago, Illinois 60690-0834|
Web page: http://www.chicagofed.org/
More information through EDIRC
|Order Information:|| Web: http://www.chicagofed.org/webpages/publications/print_publication_order_form.cfm Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jong-Il Kim & Lawrence J. Lau, 1996. "The sources of Asian Pacific economic growth," Canadian Journal of Economics, Canadian Economics Association, vol. 29(s1), pages 448-454, April.
- Constance R. Dunham, 2001. "The role of banks and nonbanks in serving low- and moderate income communities," Proceedings 903, Federal Reserve Bank of Chicago.
- Edward Simpson Prescott & Daniel D. Tatar, 1999. "Means of payment, the unbanked, and EFT '99," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 49-70.
- anonymous, 1999. "Banking relationships of lower-income families and the governmental trend toward electronic payment," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jul, pages 459-473.
- Joseph J. Doyle & Jose A. Lopez & Marc R. Saidenberg, 1998. "How effective is lifeline banking in assisting the 'unbanked'?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 4(Jun).
- Arthur B. Kennickell & Martha Starr-McCluer & Annika E. Sunden, 1997. "Family finances in the U.S.: recent evidence from the Survey of Consumer Finances," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jan, pages 1-24.
- Sherrie L. W. Rhine & Maude Toussaint-Comeau & Jeanne M. Hogarth & William H. Greene, 2001. "The role of alternative financial service providers in serving LMI neighborhoods," Proceedings 785, Federal Reserve Bank of Chicago.