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Using the Surveys of Consumer Finance from 1989 to 2001, this study explores households' reasons for not having a checking account. Reasons have changed over time, shifting away from account features and toward human capital and institutional reasons. We also find that reasons for not having an account are related to income, race/ethnicity, marital status/gender, planning horizon, education, previous account experience, and credit history. We suggest potential responses for community educators, firms, and policy makers. ********** Conventional wisdom holds that having a bank account is a first step toward building a financial identity, which leads to further access to financial products and services and thence to advances in family well-being, stability, and security, and finally to community security and economic development. Yet, 9.7 million U.S. households (about 9.1%) remain without any bank account and 12.7% have no checking account, the basic transaction account for most U.S. families (Aizcorbe, Kennickell, and Moore 2003). While a substantial and growing body of literature has developed on the determinants of holding a bank account, modeled as a "have/don't have" decision, there has been relatively little analysis of the motivations behind being unbanked. Our reason for wanting to understand these motivations stems from our desire to design programs and policies to respond to these households in meaningful ways. Because there are a variety of reasons for not having an account, there need to be a variety of responses if we are to bring people into the financial mainstream. Community educators want to know which motives may be addressed by an educational response; financial institutions want to know which motives may be addressed through account features and product design; and policy makers want to know which motives may need to be addressed through public policy. Thus, the goals of this paper are to explore the reasons and motivations households give for not having a bank account (specifically, a checking account), to examine whether these reasons have changed over time, and to identify which motives could be addressed via education, product design, and public policy responses to bring more households into the mainstream financial sector. BACKGROUND As indicated above, there has been substantial work looking at who does and does not have a bank account (see Caskey 1994, 1997a, 1997b, 2001 ; Hogarth, Anguelov, and Lee 2001; Hogarth and O'Donnell 1997, 1999, 2000; Hungerford 2000; Rhine, Toussaint, Hogarth, and Greene 2001; Stegman and Faris 2001). Determinants have included variables related to income, net worth, home ownership status, race and ethnicity, age, education, employment status, vehicle ownership, and credit history. The literature on why some people do not have an account is somewhat sparse. One of the first studies on why people do not have checking accounts was a qualitative analysis conducted by Schlax and Levy in 1971. Through a series of focus groups and 214 individual personal interviews in urban settings (Atlanta, Buffalo, Charlotte, Chicago, New York, San Francisco, and Toronto), they found that reasons for not having a checking account were primarily psychological in nature. Consumers cited their money management habits and preferences for having "money in hand"; perceived loss of financial control; lack of competence in handling the bookkeeping part of having an account; having a viable alternative to a checking account; and a basic misunderstanding of checking accounts ("they are for organizations, executives, people with a lot of bills" (Schlax and Levy 1971, p. 1-10)). Most of the unbanked households in this study had low incomes. Andreasen (1975) and Caplovitz (1967) posited that lower-income consumers were disadvantaged not only because of their low incomes but also because they tended to be minority, often had limited language ability, were older, and tended to patronize limited markets. …

Using the Surveys of Consumer Finances from 1992 to 1998, this article explores the reasons for not having a checking account, including product design, human capital, motivation for having a checking account, and institutional factors. Focusing primarily on reasons related to product design, we found that smaller family units, unemployed people, those with shorter planning horizons, older people, families with higher levels of education, those who have some other bank account, and those with better credit histories were more likely to give reasons related to product design than were their counterparts. Reasons for not having an account have changed over time, shifting away from product design factors toward other reasons. We suggest potential responses for firms, community educators, and policy makers.