Banking

Individuals need access to the banking system and credit to be able to save and invest. It is essential for financial independence. 

In recent years, the banking industry has changed dramatically. Banks have consolidated and are using technology to a much greater extent. Some banks provide services entirely online and have no physical branches. Many communities have seen bank branches close, especially in rural areas. Lack of access to basic-banking services in person may especially hinder older adults, people with disabilities, and people with low incomes who may not have reliable access to technology. It may also make banking less safe if it is more difficult to detect fraud or financial exploitation. These trends may increase financial exclusion and isolation as more consumers are left out of the mainstream banking system. Instead, they may turn to costly alternative financial services. 

Banks can counter these trends by offering low-cost basic-banking services. These are sometimes called lifeline accounts. Typically, they have a low initial deposit requirement, no minimum balance requirement, and low fees. Some jurisdictions require banks to offer them. For example, New York mandates that all banking institutions in the state do so. Public banking options can help expand access to people with low incomes. This involves public institutions, such as post offices, providing low-cost banking services directly to the public. 

Fees: Banks increasingly rely on revenues from fees rather than from interest earnings. Between 1984 and 2015, their fee revenue more than doubled after adjusting for inflation. According to the CFPB, consumers paid $15.5 billion in overdraft and not-sufficient fund fees alone in 2019. Other fees include service fees on checking and savings accounts and charges for using automated teller machines (ATMs). 

Banks must receive a consumer’s affirmative consent before charging overdraft fees for transactions at ATMs and points of purchase. Banks are still able to charge overdraft or insufficient funds fees for returned checks and electronic payments. Transactions that lead to overdrafts are often small, yet they result in an average fee exceeding $33 per occurrence. Some banks also charge fees to use an in-person teller. This can create problems for some older adults, particularly those living in less affluent neighborhoods. Such customers may need services from bank staff because of personal safety, disability status, literacy or language barriers, or a lack of familiarity with or trust in electronic banking. 

This increased reliance on fees has raised costs to the point that banking services are beyond the reach of some people with low and moderate incomes, including older adults. In response numerous local and regional organizations across the country have worked with financial institutions to ensure that safe and low-cost account options are available to all residents through the BankOn initiative. As of 2021, 90 BankOn coalitions have formed across the United States. Participating financial institutions offer a checking account or prepaid card that meets certain consumer protection standards. 

Electronic banking: Most banking transactions that Americans make are conducted electronically. More payments are made electronically than by check. The overwhelming majority of paychecks, as well as nearly all Social Security benefits, are electronically deposited into a bank or credit union account or onto a prepaid debit card. 

According to a survey from the Federal Deposit Insurance Corporation (FDIC), older adults are increasingly using electronic banking. Between 2019 and 2021, households headed by individuals age 45 and older increasingly used online or mobile banking, and decreasingly used bank tellers, as their primary method of accessing their bank accounts. The rate of mobile banking among people age 65 and over nearly doubled over this period. The COVID-19 pandemic may have accelerated the adoption of online and mobile banking options among older adults. 

Federal law requires banks to document electronic payment activity, limit consumer liability for unauthorized transactions, and create procedures for error resolution. Institutions are not required to provide periodic paper statements if account transaction information is available by telephone, electronically, or, upon the consumer’s request, in writing. 

The Credit Card Accountability Responsibility and Disclosure Act, also known as the Credit CARD Act, created consumer protections for gift cards. (Prepaid cards, also known as general-purpose reloadable cards, are different from gift cards.) Gift cards cannot expire less than five years from the date that funds were first deposited on the card. They must print disclosures related to fees and expiration dates on the gift card. Dormancy, inactivity, and service fees can only be charged when the gift card has not been used for at least one year, and no more than one such fee can be charged per month. Gift card sales have soared in recent years and are expected to reach $221 billion by 2024. Unfortunately, the soaring sales have been matched with an increase in gift card fraud (see also Scams and Fraud in this chapter). 

Account features that prevent financial exploitation: Financial exploitation presents a significant threat to older adults. It can destroy their finances and wreak havoc on their emotional and physical well-being. It increases the likelihood of depression and anxiety and even hastens death. The average victim of exploitation loses $120,000, which is almost the average level of savings for a household age 50 and older. The vast majority of consumers—four out of five—prefer having accounts with institutions that proactively fight financial exploitation. One way to do so is for financial institutions to put in place account features that prevent exploitation before money leaves the account. For example, financial institutions can analyze data to identify at-risk consumers, provide read-only account features that allow caregivers to track movements without giving access to funds, and prevent the sale of inappropriate products to people with dementia.