You work hard for two weeks and payday finally comes. But instead of a quick stop at an ATM to deposit your check, you go to a payday loan store and wait in line. You finally get to the head of the line only to watch a check casher take a hefty slice of your money, up to 10 percent. After that, it's another trip on the subway or the bus home with your income cashed in your pocket. If something goes wrong - you're mugged, you forget your purse on the train - all your income for the past two weeks is gone.
This is the uncomfortable, stressful and expensive reality for the nearly one in 10 adult New Yorkers who do not have a bank account. Latinos are among the most at risk, with more than half of Latino households reporting that they are not "fully banked," meaning they in some way rely on expensive, predatory check cashing and payday loan services, according to the FDIC.
In the past few weeks, there's been a new development in New York City in the long struggle to help more people get access to quality, low-cost financial services. And both Amalgamated Bank and Make the Road New York are excited to see what happens.
Not having a bank account is a miserable experience. Most of us take our bank accounts for granted - we pay our monthly bills in just minutes, or if we are using an automatic withdrawal, we don't think about them at all. We expect that, with some exceptions, the money we get in our paycheck will be the money available to us, and we won't be charged just to get access to it. We expect services like overdraft protection, no-fee checking, and a dozen other things, all of which allow us to manage our day-to-day finances without devoting a huge amount of time and money.
The exact cost of being unbanked can be hard to pin down. A 2010 study from the Federal Reserve said annual costs for using check cashing stores to cash payroll checks and pay bills with money orders can reach $1,200 a year - a huge sum for low-income families . Indirect costs, a different Fed study noted, include lost opportunities to build credit and savings. And as any working parent knows, one of the most valuable resources we have is time, and being unbanked or underbanked can cost you a lot of that.
So why do so many families not have a bank account? One major reason is the lack of the valid photo ID necessary to meet with a bank and open one. Banks need this basic form of ID to meet regulatory requirements, but traditional state-sponsored IDs like drivers' licenses can be expensive and difficult to obtain. This is especially true for the 37 percent of New Yorkers who were born overseas.
This is where Mayor Bill de Blasio's new municipal ID program can be of such a huge benefit. The ID is free and easy to obtain for any New Yorker who can prove identity and residency. The immigrant community stands to gain greatly by the creation of the municipal ID. Because many immigrants do not have drivers' licenses or state IDs, they have been effectively barred from engaging in most mainstream financial transactions --until now.
Amalgamated Bank was founded in 1923 by working people, many of them immigrants, who found themselves shut out of the banking system of that time. Like many immigrants in New York today, they had no place to store their earnings securely and no formal, low-cost way to send money to their loved ones overseas. It is with that knowledge of our history that Amalgamated Bank decided to partner with the city in this new program. Amalgamated will accept the new municipal ID as proof of identity for opening an account and is inviting people enrolled in this program to come open bank accounts at any of our NYC branches.
Immigrants are not the only community that will benefit from the municipal IDs. Many other groups have also historically been marginalized by the government ID system - groups like students, senior citizens, workers too poor to afford ID application fees, and transgender individuals. The municipal ID will be available to all these groups free of charge and all are welcome.
Accepting the municipal ID program will help the immigrant community solve one major logistical hurdle to entering the financial mainstream. But we hope it does something larger. Studies show that another major reason that marginalized communities avoid banks is a lack of trust. It may be a set of bad experiences, or confusion over the requirements. But for whatever reason, they have felt unwelcome.
We hope that, together, Make the Road New York and Amalgamated Bank, along with many other partners, can help connect New Yorkers from all walks of life with quality banking services. We want everyone to enjoy the same benefits so many of us take for granted, to come out of the financial shadows, to put their money to work for them and not for the check cashers and payday lenders. We want everyone to understand that that they are, indeed, welcome here.