Though hard to believe in today’s technologically-advanced society, many consumers — approximately 15 percent of U.S. households — do not own a checking account. Why not? How do these consumers cash their checks or pay their bills?
These questions and more are addressed in the latest issue of Economic Quarterly, a publication produced by the Federal Reserve Bank of Richmond. In their article entitled “Means of Payment, the Unbanked, and EFT ’99,” Fed economists Edward S. Prescott and Daniel D. Tatar, uncover the reasons that many low-income individuals forego checking account ownership. Cost is the primary factor. Rather than paying account fees, many cash their checks for free at banks and grocery stores and pay bills with cash or low-cost money orders. Surprisingly, few regularly use costly check-cashing outlets.
The Economic Quarterly is a free publication containing economic analysis pertinent to Federal Reserve monetary and banking policy. For copies or more information, contact the Federal Reserve Bank of Richmond’s Public Affairs office at 804-697-8108 or visit their Web site at [http://www.rich.frb.org].
Federal Reserve Bank of Richmond news releases can be found at [http://www.rich.frb.org].