Two new novels The presidents of the Democratic Congress, Alexandria Ocasio-Cortez and Rashida Talib, introduced a bill in October, the Public Banking Act, which would create publicly nonprofit banks to meet the needs of millions of underbanked and unaffiliated Americans. Public non-profit banks will be formed.
Federal Deposit Insurance Corp said 2018 survey 22% of Americans were unbanked or reduced, meaning they either did not have a bank account or depended on payday loans for some of their banking needs or could check cash services.
The proposed bill would create banks that would operate as a nonprofit and would not charge consumers a monthly fee or require a minimum deposit and would limit the amount of interest that would be levied for small-business loans.
What is a public bank?
The United States has operated public banks in the past, similar to the United Kingdom postal banking system. The Postal Service offered limited services such as deposit accounts and placed them in other banks, but the money was supported by the federal government. From 1911 to 1967 the post office banking services were operated and formed under a Congress Act.
The only remaining American public bank, Bank of North Dakota, is a state-owned financial institution founded in 1919 by the state legislature.
Bank deposits are not insured by the FDIC but by the State of North Dakota. The bank’s profits are supported by a reduction in the interest rate and programs that, according to the bank, “help drive economic development and infrastructure projects across the state.”
Will public banks be good for consumers?
The Federal Reserve in its 2018 survey report estimated that 6% of adults in the US are unbanned and do not have a checking, savings, or money market account. Unbanked populations often resorted to using “alternative financial services”, which were expensive and charged high interest rates and fees, including money orders, checking services, powers, auto title or payday loans, and advances or tax refunds of advance companies. Payment included.
Another 16% of adults were “underbanked”. While they had a bank account, they also relied on those alternative services to carry out transactions such as paying bills.
While unbanked and underbanked bank deposits could avoid minimums and fees and track their transactions, they did not have access to earn interest or obtain loans through credit cards and other loans.
Saira Rahman says that the government can make public banking options unbanked and more or less chance to “avoid predatory lending practices and give them the ability to get out of terrible practices like high-fee check cashing services.” Finance for online bank HMBradley. “My hope is that it also positively impacts their credit, as a bank account is essential for long-term financial development, including the ability to purchase a home.”
How accurate is the federal public banking system?
As long as Republicans remain in control of the Senate, enacting the proposed House bill will be challenging.
The proposed bill is likely to face gridlock in Washington, says John Popo, a partner at The Gallatin Group, a regulatory advisory company that specializes in working with investment companies, banks and technology startups.
“Hopefully, it starts a discussion on how to serve the better and weaker people who are growing within minutes in a significant part of the population,” he says.
Most banks require that you need a credit history to open an account that works against many Americans.
What are the current better options for a consumer?
You can open an account in a financial institution that has free bank accounts and other consumer-friendly facilities, such as credit unions, CDFIs or online banks that have checking and savings accounts without a minimum deposit free of charge. Credit unions typically offer higher interest rates for savings, lower rates on loans, or lower fees because they operate as organizations for profit.
Another option is to bank with CDFI that works with consumers who have low credit scores and income, says Hank Hubbard, president and CEO of Detroit Credit Union.
“I see the need as a whole,” he says. “Credit unions, particularly CDFI credit unions, provide a ready-made framework that is already regulated.”
He recommends finding ways to “uplift the efforts of credit unions” as this would be a better and more cost-effective way to solve the problem.
“This can be done with specific funds for CDFI funds to provide these services to individuals,” Hubbard says. “This can also be done by offering a partnership between the post office and local credit unions to use the space in post office branches. This will only cost a fraction of the cost of building a national bank.”
Stessa Cohen, a strategic advisor at Pivet Assets, a consultancy for companies in the fintech industry, recommends promoting the current efforts of community banks and credit unions to upgrade their technology and attempt to eliminate bank deserts Can go
Here are some banks that do not have any fees for checks or savings accounts:
Associate bank. Its savings account has no monthly fees and no minimum balance, and it pays 0.6% on all balances. Its checking account does not charge fees, and checks are free.
Discover. The bank’s savings account does not include any monthly fees and no minimum balance, and it pays 0.55% on all balances. There is no charge on 1% cash back, free checks and insufficient funds or overdraft protection for all debit card purchases up to $ 3,000 in a check account.
HSBC Bank. HSBC offers a savings account with no monthly fees and no minimum balance requirements, and it pays 0.01% on balances under $ 15,000, which increases to 0.05% for balances of $ 15,000 and higher.
Charles Schwab. Schwab’s checking account charges no monthly fees, requires no minimum balance and offers unlimited ATM fee discounts globally. It does not charge foreign transaction fees, and deposits earn 0.03%. Its savings account provides similar benefits, with deposits amounting to 0.05%.
American Express. There is no monthly fee in AmEx’s savings account. It has no minimum balance requirement and pays 0.6% on all balances. AmEx does not provide any checking account.
Marcus by Goldman Sachs. Marx offers Online savings account with no fees or minimum deposit amount. It pays 0.5% on the deposit. Marcus does not offer checking accounts.