According to the 2021 Federal Deposit Insurance Corporation survey of unbanked and underbanked households, just 4% of U.S. born households are unbanked or underbanked. If we look at households where the residents were born outside the U.S. and have achieved citizen status, this percentage rises to 4.6%. If we look at the non-citizen households, as many as 11% are unbanked or underbanked.
Additionally, foreign-born residents in the U.S. often worry more about their finances than native residents do. Data from the National Health Interview Survey has shown that foreign-born respondents reported worrying more about the following financial categories: retirement, medical costs due to illness or injury, standard of living, medical costs of routine healthcare.
Financial services are an essential part of creating wealth. People need to take out loans to make big purchases like cars and houses, and not having a bank account can complicate the process of receiving public assistance. This means that by being unbanked and underbanked at much higher rates, non-citizen immigrants are at a significant financial disadvantage.
To address this problem, we first need to understand what barriers are preventing immigrant populations from engaging with the financial system.
One type of problem many foreign-born residents face are economic barriers. These are challenges like not having enough money to open a bank account in the first place. These are the kind of problems that policymakers have the greatest ability to solve. Local governments can offer cash assistance or low-interest loans to help immigrants establish a financial footprint and begin the process of growing their wealth.
Another type of problem immigrants face are social barriers. These are things like language barriers that make interacting with traditional banks more difficult. One study of Asian immigrants in Los Angeles suggests that ethnic financial resources such as ethnic banks could help reduce some of these issues.
One major social issue that has become more relevant in recent years is fear surrounding immigration status and the financial system. A 2021 study from the Urban Institute found that one in five adults in immigrant families with children reported that they or a family member avoided one or more non-cash public benefits because of immigration-related concerns.
This is despite the fact that during the COVID-19 pandemic, rule changes made it so these benefits were no longer considered during the application process for green cards or temporary visas. Policymakers need to make sure that people understand what the rules are and how they apply. This is especially important in the context of immigration and public benefits, which are both extremely important and endlessly complicated state systems.
If policymakers want to help their immigrant constituents achieve financial security, giving them the tools to engage with the financial system is a critical first step. Removing barriers to entry could help reduce the number of non-citizens that are unbanked or underbanked.