Partners (Number 1, 2006)
Partners (Number 1, 2006)
|Clearing Hurdles to Mainstream Banking|
First-time bankers sometimes meet with unexpected obstacles when they try to open an account. Those with a problematic credit record may find it especially difficult. Nevertheless access to a banking relationship is important for financial success, and the Community Affairs Office partners with organizations helping those who want to enter or re-enter the financial mainstream.
Even without credit blemishes, it can be tough to set up a first account without banking history. But many banks are willing to open an account for first-time customers with reliable income and a clean financial slate. New account holders can then build credit history through secured credit cards or co-signed loans.
A strong banking relationship offers many advantages that make it worth the effort, including access to direct deposit of paychecks, checking accounts, debit and credit cards, and on-line banking. Banks also help families build wealth through savings and investment products and reasonable transaction fees. Loan products allow families to own a home or make other major purchases sooner. Plus, banks provide the security of FDIC insurance.
While establishing a banking relationship takes time, the association can be damaged quickly: just a few mistakes like bounced checks or missed loan payments can lower one’s credit score. Once an individual has been ousted from mainstream banking, it’s often extremely difficult to return—even when the missteps have been corrected—because banks rely on credit reports. Fixing the problem is indeed a starting point, but restitution alone is usually not enough.
The Federal Reserve understands that access to banking services is important. Our Community Affairs office works with partners throughout our region to get the unbanked on board—both those who have never banked and those who have an impaired banking history.
Personal financial education is crucial for those who have fallen out of mainstream banking, and it’s a central component of our work. However, financial education alone doesn’t guarantee reconnection with a bank; it takes the commitment of our financial partners to get potential customers on the right track. One such partner is Get CheckingTM (www.getchecking.org), a program that helps individuals gain access to mainstream banking.
Get Checking is a national collaboration of the University of Wisconsin, its extension services and eFunds. The organization not only provides financial education leading to a bank account, but it also cultivates a network of financial institutions to provide banking for its graduates.
Since 2001, Get Checking has helped nearly 9,000 people become new deposit account holders, and the number of graduates is growing rapidly. Although Get Checking is just one of many viable financial education programs, it stands as a model of effective collaboration that achieves real results.
Get Checking can’t promise to resolve every financial problem, but it does provide critical assistance for those trying to enter mainstream banking.
Juan C. Sanchez