WASHINGTON–Just 25% of the country’s largest banks by number of branches promote automatic saving and offer savings accounts that are accessible and affordable to low- and moderate-income households, according to a new Consumer Federation of America (CFA) report.
In all, the study reviewed 101 banks.
By contrast, the CFA said its study found six-of-the-10 largest credit unions by number of branches offer a savings account with a very low initial deposit and no minimum balance requirement while three others have low minimum balance requirements to avoid fees.
Disaggregating 2016 Federal Reserve Board data, the report also found that just 38% of households in the two lowest income quintiles (40% of all households) have a savings or money market deposit account at a bank or credit union, the CFA further reported.
“If banks made a greater effort to offer and market affordable savings accounts to lower income families, these households would be better able to meet their emergency savings needs,” said Stephen Brobeck, a CFA Senior Fellow and author of the report, in a statement.
According to the CFA, the report emphasizes the importance of savings accounts that are fed by regular, automatic transfers from checking.
“Eighty percent of all lower income households [two lowest income quintiles] have checking accounts,” noted Brobeck. “It would be relatively easy for banks to promote automatic savings to these families,” he added.
Other Findings
Other findings in the report:
- 79% of the big banks charge no monthly fees on savings accounts held by those under 17 or 18 years of age
- Twelve of the banks extend the fee waiver to young adults up to the age of 24 or 25
- Seven banks waive monthly fees for older persons
Saving Larger Sums
The CFA added the report recognizes that while small savings accounts may not be profitable for banks, they will “eventually permit some customers to save larger sums and take out auto and mortgage loans.”
The group further stated the report points out that banks can maintain these small accounts inexpensively when deposits are made automatically, withdrawals are through ATMs, and monthly statements are emailed.
The CFA also reminded the Community Reinvestment Act requires banks, especially large ones, to meet a service test for making available services, including “low-cost bank accounts.”