Everyone has a bank account, right? Wrong.
Nearly 30 percent of U.S. households either have no one with a bank account or, if they do, they have also used money orders, check cashing, international remittances, payday loans, refund anticipation loans, rent-to-own services, pawn shop loans or auto title loans within the past 12 months, according to a 2015 survey by the Federal Depository Insurance Corporation (FDIC).
As a result, nearly 35 million Americans are classified as“nonbanked” or “underbanked.” There are different reasons why— nearly 60 percent say they don’t have enough money to keep an account open, some wanted financial privacy, others could not afford the bank fees, some just don’t trust banks.
So when people need to cash a check or get a loan, where do they turn? Well, they probably go to a pawn shop. A study by PawnGuru found that pawn shop regulars are 2.5 times more likely not to have a bank account.
“We welcome everyone into our stores,” said Irwin Sablosky, co-owner of Wm. S. Rich & Son, the oldest and largest pawn shop in New Jersey. “But we’re also aware that for many of our customers, we may be one of their only financial resources. We regularly cash our customers’ paychecks, provide short-term loans using their valuables as collateral or purchase items outright.
“The benefit of using a pawn shop is that our transactions are immediate. There are no complicated loan applications or having to wait days or weeks for an approval,” Sablosky said. “And if a customer takes a short-term loan and then discovers they are unable to pay it back, there’s no negative impact to their credit score. We just keep the collateral and the customer has no further obligation.”
People who do use banks may notice that bank credit standards are tightening in early 2017. Banks are becoming stricter about credit card requirements as they work to restore corporate profits that have suffered as interest rates declined, according to a February 2017 article in USA Today.
“It can be a tough situation for lower-income individuals and families,” Sablosky said. “Even people who do use banks may no longer qualify for traditional banking products. We’re proud to be a resource for those who need alternative financing options. Pawn shops are here to stay and we have a vital role in the communities we serve.”
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