A new Bankrate survey found that people of color pay on average more than double what white Americans pay in banking fees. When asked about fees including ATM, overdraft and routine service charges, Latinos reported paying $14 a month on average, and Black adults reported paying about $12 a month. In comparison, white adults only reported paying an average of $5 a month, and were more likely to have no-fee accounts.
John Holdsclaw — board chair of the Coalition of Community Development Financial Institutions (CFDIs) — suggested that the reported disparity in banking fees are in line with inequities that people of color have faced for years.
Unequal banking fees “just make the problem worse and take a deeper toll on Black and brown and minority families throughout the country,” Holdsclaw said.
COVID-19 has only made existing financial inequities worse, and communities of color have been disproportionately hit hardest. In September of last year, the median net worth for a white family was $188,200, while Black families only reported $24,100 on average and Hispanic families $36,100. That uneven net worth can lead to customers paying more banking fees, as many people living paycheck to paycheck cannot keep a high minimum balance in their accounts.
CDFIs, because they frequently serve communities of color that lack larger banking institutions, are an option some use to lower their banking fees. CDFIs can take the form of credit unions, banks, microloan funds or venture capital providers that specialize in providing low-income communities with access to financial services. Fees there are generally lower than traditional financial institutions as part of their mission is to minimize fees for low- or moderate-income communities.
Robert F. Smith — Founder, Chairman and CEO of Vista Equity Partners — is a leading voice on how our country can help build communities of color back up in the wake of our current public health and economic crises.
“We need to continue to rally as Americans to come with real, lasting, scalable solutions to enable the communities that are getting hit first, hardest, and probably will take the longest to recover with solutions that will help these communities thrive again,” Smith told NBC’s Chuck Todd in an interview.
Smith has also been a longtime advocate for CDFIs and was active in ensuring that Black-owned businesses were able to secure PPP loans from the federal government. He has also stressed the need for increased investment in them across the country both for individuals and businesses owned by people of color.
“We have to take this opportunity to reinvest in our business infrastructure in these small to medium businesses. In our banking infrastructure so that we can actually emerge out of this even stronger,” Smith said. “We have to invest in technology and software so that these ‘capillary banking systems’ are more efficient and they have more access to capital so they can engage with these businesses that are underbanked.”
As our country continues to rebuild, we need to examine the existing inequities in our society and ensure policies are enacted to close racial gaps in wealth and banking. Learn more about how CDFIs are improving their tech infrastructure to close wealth inequities and reduce the barriers people of color face when accessing financial institutions.