Poor often don’t know benefit of banks

The study, which surveyed 173 low-income residents in New Bedford, belies perceptions that limited access to banks drives low-income families to use higher-cost alternatives, said Michael Goodman, an associate professor of public policy at UMass Dartmouth who oversaw the study.

With nearly 160 banking locations in the New Bedford area, Goodman said, the challenge is to educate people that maintaining bank accounts can help establish and build credit, increase assets, and lower household costs. A state legislative commission recently found that development of family assets, including savings accounts, is the most effective way to lift people from poverty.

“These are people who are living in a very informal economy,’’ Goodman said. “People need the opportunity to learn what the advantages are of having banking relationships, building credit history, and being able to access credit at some point in the future.’’

On average, low-income people without bank accounts spend about 5 percent of their income, about $800 to $1,000 a year, on fees from check-cashing services, according to Bank On, a San Francisco program that aims to remove banking barriers for people with low incomes. That adds up to about $40,000 over a working life.

But residents without bank accounts are not the only ones wasting income, according to the UMass study. Nearly two out of three low-income residents with bank accounts said they still use check-cashing services. A key reason was that they could get money faster because of more convenient hours and locations.

Low-income residents often live paycheck to paycheck and put immediate needs ahead of long-term savings and financial planning, Goodman said.

The problem is not limited to New Bedford. About 15 percent of low-income households in Massachusetts and 20 percent in the United States do not use banks, according to a 2009 survey by the Federal Deposit Insurance Corp. The FDIC also found that statewide and nationally, black and Hispanic people are more likely to not have bank accounts.