Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

The Importance of Check-Cashing Businesses to the Unbanked: Racial/Ethnic Differences

The Importance of Check-Cashing Businesses to the Unbanked: Racial/Ethnic Differences The roughly 9.1% of all U.S. families that are without some type of transaction account (unbanked) are disproportionately represented among minorities. The unbanked often must rely on alternative ways to carry out basic financial transactions such as cashing payroll checks and paying bills. This study analyzes unique survey data and finds that a consumer's decision to patronize check-cashing businesses is jointly made with the decision to be unbanked. For the unbanked, these businesses are an important source of financial services. Attributes that contribute to these decisions, however, vary with the racial/ethnic group. Latent preference effects are also observed to influence this joint decision for blacks and Hispanics. These findings may explain in part why the provisions of the Debt Collection Improvement Act (DCIA) of 1996 have not been more successful in bringing unbanked federal benefits recipients into the financial mainstream. Consumer participation in mainstream financial markets can improve their ability to build assets and create wealth, can protect them from theft and discriminatory, predatory, or otherwise unsavory lending practices, and may promote economic stability and vitality in the communities where they reside. By more fully understanding consumers' financial decisions, policies can be better directed to improve the effectiveness of legislation such as the DCIA of 1996 in encouraging mainstream financial market participation. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Economics and Statistics MIT Press

The Importance of Check-Cashing Businesses to the Unbanked: Racial/Ethnic Differences

Loading next page...
 
/lp/mit-press/the-importance-of-check-cashing-businesses-to-the-unbanked-racial-OPXGKeOpNb

References

References for this paper are not available at this time. We will be adding them shortly, thank you for your patience.

Publisher
MIT Press
Copyright
© 2006 The President and Fellows of Harvard College and the Massachusetts Institute of Technology
ISSN
0034-6535
eISSN
1530-9142
DOI
10.1162/rest.2006.88.1.146
Publisher site
See Article on Publisher Site

Abstract

The roughly 9.1% of all U.S. families that are without some type of transaction account (unbanked) are disproportionately represented among minorities. The unbanked often must rely on alternative ways to carry out basic financial transactions such as cashing payroll checks and paying bills. This study analyzes unique survey data and finds that a consumer's decision to patronize check-cashing businesses is jointly made with the decision to be unbanked. For the unbanked, these businesses are an important source of financial services. Attributes that contribute to these decisions, however, vary with the racial/ethnic group. Latent preference effects are also observed to influence this joint decision for blacks and Hispanics. These findings may explain in part why the provisions of the Debt Collection Improvement Act (DCIA) of 1996 have not been more successful in bringing unbanked federal benefits recipients into the financial mainstream. Consumer participation in mainstream financial markets can improve their ability to build assets and create wealth, can protect them from theft and discriminatory, predatory, or otherwise unsavory lending practices, and may promote economic stability and vitality in the communities where they reside. By more fully understanding consumers' financial decisions, policies can be better directed to improve the effectiveness of legislation such as the DCIA of 1996 in encouraging mainstream financial market participation.

Journal

The Review of Economics and StatisticsMIT Press

Published: Feb 1, 2006

There are no references for this article.