‘Bank On’ program connects residents, financial institutions

With the number of bank failures in a year reaching the highest level since 1992, that shoebox under the bed may be looking like an increasingly better place to stash your cash.

However, with the expansion of the Bank on Indiana program, the state of Indiana is looking to change that opinion.

Based upon the successful Bank on Evansville program launched last year, Bank on Indiana will operate as an umbrella to help build infrastructure programs throughout the state, with the goal of improving financial education and creating bank
accounts for more than 200,000 “unbanked” Hoosier residents.

In less than a year, the Bank on Evansville program managed to open 625 accounts, more than half of its two-year goal. 

Currently, unbanked households are often forced to utilize check cashing services to receive money from their paychecks, which typically charge a service fee, said Patty Avery, project manager for the Bank on Evansville program.

Avery said that unbanked Indiana residents spend an average of $1,100 a year on check cashing fees and check writing fees for using these services. 

“To be able to put your income to work you have to pay somebody to get that cash in your hands,” she said. “And then you have to turn around and pay them even more to write checks for you to pay your rent and your utilities.”

Those residents without a financial institution are also unable to build a financial track record, making essential purchases like cars and homes difficult, Avery said. 

“You’re not building that track record with a checking account where they see that income coming in, and they see that being balanced every month,” she said. “So that when you need a car loan, you don’t have any opportunities other than to go to a place that’s going to charge you a much higher interest rate.”

State officials are hoping that by expanding the program to cities statewide, they will be able to further educate residents about the pitfalls of remaining unbanked, said Chris Conner, director of communication for the treasurer. 

Conner said the program puts together a large steering committee that will work to set up smaller, local Bank on Indiana programs throughout the state, and create an interactive Web site where residents can get information about the benefits of banking.

Previously, when residents left a financial institution because of accumulating overdraft fees they were unable to pay, they weren’t able to open an account at another institution, Avery said.

The Bank on Indiana program allows participating institutions to waive the requirement of paying back these previous banks in order to create a new account.

Laura Wilson, vice president of communications at the Indiana Bankers Association, said there is a general sense of mistrust for the banking system in the United States.

Many people may come from another country with an unstable banking system and others from a family that has never banked in their life, she said. Wilson said that the main goal of the program is essentially to dispel this mistrust.

“The program really benefits these people,” Wilson said. “If people have a reluctance to form a relationship with the depository institutions then it puts them at risk because it puts large sums of cash at home.”

Avery said that program follows a very adaptable model that cities around the state will hopefully find easy to follow.

The program, which began in San Francisco, Seattle and Evansville, has had success in all three cities, she said.

“The program is raising awareness among people and letting them know that there is an alternative available to them,” Avery said. “It’s creating a second chance to create a bank account.”