Word of the Day: “Unbanked”

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The growing list of hard-times, recession-era words and phrases like mancession and recession porn welcomes a new member: “unbanked.” If the word applies to you, you might be paying nearly 1000% interest on short-term loans.

The Washington Post explains:

In the financial world, those without access to traditional financial services have been dubbed the “unbanked.” With spotty bank records and thin or nonexistent credit reports — documents often required to rent an apartment, buy a cellphone or even get a job — they rely on storefront businesses that may charge a 4 percent fee to cash a check or a 995 percent annual interest rate for a short-term loan.

Nearly all of the unbanked are low-income people living paycheck to paycheck—and because they don’t or can’t use regular banks, they aren’t even collecting their paycheck’s full amount. (There are alternatives to those high-interest payday loans, by the way.) These are the same people targeted as potential customers of prepaid debit cards, which also require no ID and also rapidly siphon off the user’s money.

Legislation is in the works to limit the fees and interest rates charged by check-cashing services and payday loan operations, so perhaps the unbanked won’t be quite as unhinged.