Consumers across the country are expected to spend more than $727 billion this holiday season, according to the National Retail Federation. But for tens of thousands of Hawaiʻi residents without a bank account, shopping means high-interest loans, prepaid cards with fees, and sometimes a continuing cycle of debt.
This is the world of the unbanked.
When Nānākuli resident and mother of two Shyla Lafaele lost her job a year ago, her bank account took a hit.
“I was unable to keep up with my payments on my credit card, and then it went negative and I couldn’t get out of it,” Lafaele said.
The account eventually closed, which only made matters worse for her once she started earning a paycheck again.
“I was unable to open up any kind of bank account. The only route I had was to turn to like a prepaid card…But with that it comes with fees,” she said.
Alternative financial services such as prepaid debit cards, cash checking services, and pay day loans, were created for the “unbanked” population, folks like Lafaele.
THE COST OF BEING UNDERBANKED
These services may seem convenient in the short-term for folks without access to mainstream banking services, but they often come with hefty fees, which add up in the long run says Jeff Gilbreath. Heʻs the director of Lending and Development at Hawaiian Community Assets.
“We are seeing the average cost of what families are spending if theyʻre underbanked or even unbanked is about $1,200 annually,” Gilbreath said.