More New Mexicans using services like payday loans
Despite an improving national economic climate, more New Mexicans are relying on services such as check cashing and payday loans, according to a survey by federal regulators.
Data from the Federal Deposit Insurance Corp. show that the percentage of New Mexican households “underbanked” rose from 22.5% in 2013 to 26.9% in 2015. On the other hand, the number of underbanked households has remained constant nationwide in over the same period, about 20%. Albuquerque saw a drop from 24.4% to 21.6%.
According to the definition of the survey, a household is considered to be underbanked if the individuals who compose it have a current or savings account in a bank, but also use an alternative financial service such as money orders, check cashing , international transfers, payday loans, prepayment loans, rental services with option to buy, pawn shops or auto title loans. These services often have high fees and interest rates, creating a downward financial spiral for people who use them regularly, primarily those in economic difficulty.
FDIC Chairman Martin Gruenberg said in a statement that reaching out to the population underserved by banking institutions is crucial to the long-term health of the financial system. This “helps consumers build assets and build wealth, makes them less susceptible to discriminatory or predatory lending practices, and can provide a financial safety net against unforeseen circumstances.”
The results of the survey also showed that the number of unbanked New Mexican households in which no one had a current or savings account decreased slightly, from 10.9% in 2013 to 9.4% in 2015. The same is true nationally, where unbanked households fell from 7.7 percent to 7 percent, while the figure rose from 11.1 percent to 8.6 percent in Albuquerque.
In New Mexico as well as across the country, the Hispanic population is much more likely to be underbanked than their Anglo-Saxon counterparts, according to the survey. The most recent data from the FDIC shows that 31.4% of Hispanic households in New Mexico are underbanked compared to 18.7% of Anglo-Saxon households. Nationally, the difference is 29.3 percent for Hispanic households versus 15.6 percent for Anglo households, and in Albuquerque, it is 28.3 percent versus 15.1 percent.
Mercedes Garcia, a senior MasterCard executive who works with the credit card company’s ‘Master Your Card’ community empowerment program, attributed the gap to disproportionate poverty rates among minority groups as well as lack of awareness. from banks to the community. If individuals are not sufficiently familiar with traditional banking services that could help them create credit with an institution, she said, they are more likely to rely on expensive alternatives for their transactions.
“Few banks take the time to translate their program material into Spanish,” Garcia said. “It’s the right thing to do and it’s a huge business opportunity. “
Garcia said education is key to reducing the rate of underbanked people in any population. She said that many people feel like they don’t have enough money to use a bank regularly, and while some banks have minimum accounts and various fees, there are plenty more that do. make their services affordable to almost everyone.
“In some communities, the belief is still that money is king,” Garcia said. “But our economy is becoming increasingly cashless, and not being part of it can create financial problems that can last for generations.”