LaJua Manning works 40 hours a week, and sometimes more than that. She’s a certified nursing assistant, working overnight to take care of bedridden patients. Still, she struggles to make ends meet for her and her 2-year-old daughter.
When the paychecks do come in, she doesn’t put them in the bank. In fact, she doesn’t use a bank at all.
“I’d prefer to stay away from them altogether,” she said.
Manning is part of the population whom the financial industry calls “the unbanked.” The group is made of people who don’t put their money in traditional institutions like banks and credit unions.
In Kansas City, it’s 12 percent of the population, according to 2013 data from the Federal Deposit Insurance Corp., which collects information on the unbanked and publishes it every two years.
The FDIC noted that in Kansas City, for example, 45 percent of the black population is unbanked, compared with 3.8 percent of white households. Data on Hispanic households were not available for 2013, although 35.4 percent of that population was unbanked in 2011.
Kansas City’s unbanked population has grown by 4 percent since 2009. But just four hours east in St. Louis, the unbanked population has fallen 3 percent in the same time span.
So where does the money go?
Mario Urquilla, vice president of community development at Enterprise Bank and Trust, works directly with low-and moderate-income people, many of whom are or have been unbanked. There are several different ways that people who don’t use a bank manage their money, he said.
First, there’s check cashing. Some people take their paychecks directly to a check casher or to Wal-Mart, paying a small fee to turn their paycheck into dollars. Wal-Mart usually charges $3 per check-cashing transaction. For many of Urquilla’s clients, this is a reasonable solution.
“If I don’t have a bank account and my employer hands me a check, a $3 fee at Wal-Mart is better than some of the banks,” he said.
Aside from paycheck income, sometimes people need a little extra money to get by, Urquilla said. It’s usually a few hundred dollars to fix a car, pay a medical bill or fix a leaky roof. But, according to Urquilla, big banks just don’t provide small personal loans anymore.
“So how do those folks who just need a few hundred dollars get access to funds?” he asked. “We know what’s been created from that supply and demand is payday loans.”
According to a 2012 study by the Pew foundation, Missouri ranks as the second highest in the nation for the utilization of payday loans.
“The system exists to fill a need, but it exists in a way that it’s almost impossible for the people they’re targeting to actually be able to recover,” Urquilla said.
Mayor Sly James of Kansas City recently signed a symbolic pledge against payday loans.
“We have to do something about this,” he said.
Channa Navarro, financial coach at the Women’s Employment Network, said many of her unbanked clients don’t want to use a bank because they don’t think they have enough money.
“They haven’t had enough income,” she said. “When you don’t have enough to make it, you’re not going to feel like you have enough to justify a bank account.
But, she said, it goes both ways: “No bank really wants clients that can’t keep $10 in their checking account.”
This is what happened with Manning. She has used a bank in the past but found it confusing. She said she never really understood the fees and now owes the banks somewhere between $200 and $500.
“You’re more broke when you put your money in the bank,” she said. “I feel like they take out for this and that. It seems like you should be able to manage your own money.”
For both Navarro and Urquilla, financial education for youth is key to getting more people involved in the financial system.
“For some kids, walking into a bank is as foreign as seeing a cow,” Urquilla said.
As the son of immigrants from El Salvador, Urquilla didn’t see much of the financial world when he was growing up.
“Banking was this foreign world to me,” he said. “I’d drive by banks, and it seemed like this place where everybody wanted to be, but nobody in my realm really was.”
He feels that financial education could have been a game-changer for his family. That’s why he’s dedicated his career to educating young people about the financial system.
“If my mom had known just a little more, and had shared that with me, it would have made a huge difference in my life,” he said. “So if I can get in front of students and let them know if a bank’s not on your radar, it’s going to be really tough for you to go anywhere.”
Physical access to a bank can also impede someone from using traditional financial services. In fact, some people like Sarah Pickrell think that “bank deserts” may exist in Kansas City. She’s a financial coach at Catholic Charities. She lives east of Troost and said she sometimes wonders why she doesn’t see more banks in her own neighborhood.
“You don’t find banks on every corner over there,” she said. “I know even when I’m looking for a bank on my way home from work, and my bank has many locations, it’s so hard to find one sometimes.”
Mike Hagedorn, chief executive of Kansas City-based UMB Bank, had not seen the FDIC’s statistics on the unbanked in Kansas City before the Hale Center for Journalism showed them to him. But he said he thinks UMB is doing its best to provide banking services to the whole city.
“I know what our coverage is, and I feel that our coverage is good,” Hagedorn said. “I’m sure there’s a neighborhood that would say, ‘But we don’t have a UMB branch right down the street.’ But it’s not that simple, just to say there’s a hole there.”
In fact, some people think that the lack of access to banks in some parts of Kansas City has caused a disparity in the numbers of unbanked between white households and black households.
“I would speak to the history of Kansas City, if I’m being perfectly frank,” Urquilla said. “This has been a city with deep-seeded roots and trouble, whether it’s the Troost line that you want to look at, or whatever the case may be.”
Just four hours east in St. Louis, though, only 13 percent of black households are unbanked, and the percentage has fallen by 18 percent since 2009.
Alex Fennoy, co-chairman of the St. Louis Regional Unbanked Task Force, credits that improvement in part to the group’s efforts. But he said some families have built up a mistrust of banks over time.
“If your grandmother, mother, father, aunts, uncles were never banked and all you’ve seen was going to get money orders to pay bills, that’s what you’re going to do,” Fennoy said.
Helping people get involved in traditional banking is difficult because most people who are unbanked have chosen to be unbanked.
There is no one-size-fits-all solution, but there are groups in Kansas City working to fix the problem.
Next Step KC is a nonprofit that encourages financial services for low- and moderate-income families. It provides free tax prep and also guarantees small-dollar loans from bank partners. Urquilla, who is the executive director of the nonprofit, thinks the small-dollar loan program helps fill the gap that banks can’t.
UMB is one of the program’s bank partners. Hagedorn said working with Next Step KC makes business sense for the bank.
“It’s awfully hard to make money on loans that are a couple hundred dollars, so when you do that through a nonprofit, when you’re vetting it, you’re taking all those fixed costs out of the bank and it can be profitable for us,” Hagedorn said.
Some employers are loading paychecks directly onto prepaid debit cards, which is sort of a gateway to the banked world.
The FDIC has an initiative called the Alliance for Economic Inclusion that addresses the unbanked problem with community partners.
The Kansas City branch of the group says it has a plan to “significantly reduce the unbanked population by the year 2020.” The organization’s next meeting where they will discuss the plan is Wednesday at the Plaza Library.
KCPT’s Hale Center for Journalism serves as a center for local multimedia journalism and collaboration with national and regional news sources. The Center houses Flatland, an open-source, digital forum producing stories and conversations about things that matter in Kansas City.