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Factors That Contribute to Becoming Unbanked



    1. Sherrie L.W. Rhine ( is a Senior Economist in the Division of Depositor and Consumer Protection at the Federal Deposit Insurance Corporation
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    1. William H. Greene ( is a Professor of Economics at Stern School of Business, New York University. The authors wish to thank the anonymous referees for their helpful comments and suggestions to improve this article. The views expressed here are those of the authors and may not represent the view of the Federal Deposit Insurance Corporation.
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The proportion of US families that are unbanked (i.e., have no type of checking or savings account) has steadily declined for more than two decades. Nonetheless, more than nine million families still do not participate in the financial mainstream, and roughly half these unbanked families previously held a traditional bank account. This study uses the 2004 longitudinal Survey of Income Program Participation to examine the dynamic process within which changes in families' circumstances contribute to their becoming unbanked. Our findings suggest that families are significantly more likely to become unbanked when there is a decline in family income, loss of employment, or loss of health insurance coverage. Race and ethnicity, level of education or family income, and marital or housing status are also important determinants of whether families participate in the financial mainstream or not. To our knowledge, this is the first analysis of the dynamic process by which families change bank status.