Financially “Underserved” Americans Pay $141 Billion Annually in Interest and Fees
Underserved Americans spend as much as $141 billion a year in fees and interest rates to manage their money, according to the 2016 Financially Underserved Market Size Study. This is the sixth report of its kind from the Center for Financial Services Innovation (CFSI) and Core Innovation Capital, providing a “snapshot” of what life is like for people who do not have traditional relationships with banks or credit unions.
Unbanked and underbanked consumers make up a farily substantial portion of the U.S. economy. The survey revealed this group of people generated $1.6 trillion in financial activity in 2015, up 4.3% from a year prior. Money spent on fees and interest increased 5.9% versus a year ago, equating to $7.8 billion. Researchers predict a more modest growth over the course of 2016 at 2.1%, resulting in $144 billion in fees and interest.
The largest percentage of fees and interest payments goes to long-term credit accounts: $55.2 billion to be exact. Most of these fees went to subprime auto loans and student loans. Short-term credit lines, like payday loans and bank overdraft charges, accounted for $26.2 billion in fees and interest rates.
Underserved Americans spent more money on auto insurance ($36.5 billion) than they did for subprime auto loan fees ($24 billion). Underbanked respondents spent 26.5% more on insurance premiums than banked Americans on comparable vehicles.