Language barriers in banking
The costs of not having a bank account
Overcoming Language Barriers in Banking
What does it mean being unbanked or underbanked?
What percentage of people living in United States are unbanked?
What problems do language barriers in banking cause?
Are banks equipped with translators?
The Bottom Line
Personal Finance Banking
The challenge of overcoming language barriers in banking
Language barriers make it difficult for some to gain access to banking services
By Rebecca Lake
This article was published on December 02, 2022.
The factual information was verified by Suzanne Kvilhaug.
In the United States, language barriers can make it difficult for non-English-speaking customers to gain access to banking services. Therefore, paying bills and saving money may be more difficult.
About one in 12 people in the U.S. speak limited English, and many are unbanked.1 Today, however, there are steps being taken by the Consumer Financial Protection Bureau (CFPB) and community banks are working to reduce the language gap to help more people have access to the banking services they need.
Let’s look at the impact of language barriers in banking and how they can be taken care of.
The most important takeaways
People who speak limited English on the United States may not have easy access to banking services that they need.
An estimated 4.5% of the U.S. population is unbanked which means they don’t have bank accounts or use traditional banking products or services.2
Hispanic households make up 12.2 percent of the bank-inactive population.
Language issues can make it hard for non-native English users to get access to banking services. This could make paying off bills as well as saving cash more difficult.
Initiatives by the Consumer Financial Protection Bureau (CFPB) and community banks are helping reduce the gap in language.
Language Barriers in Banking
The language barrier can affect the ability of people to access financial services. About 5% people in the U.S. were unbanked, or didn’t have a bank account, in 2020.3 But the rate for communities that are where English is not the first spoken language is more. For example, among Hispanic households, in which Spanish is typically the main language, 12.2 per cent aren’t banked as per 2019 Federal Deposit Insurance Corp. (FDIC) data.4
About 22% from the U.S. population speaks a language other than English at home, which is 67.3 million people.5 Many of these people are fluent in English, but many don’t. One in 12 people over the age 5 are restricted English proficient (LEP) this means they can speak English less than very well.1
Communities and individuals who aren’t proficient in English can find it difficult to get banking services within the U.S. Even if banks offer basic account information or services in a variety of languages financial disclosures and written documents may not be accessible in other languages that English. Additionally, foreigners may have difficulty understanding how bank accounts, investments and other financial products function in the U.S.1
The Consumer Financial Protection Bureau (CFPB) offers numerous tools online to help Spanish people better understand U.S. banking concepts, products and services.
The costs of not having a bank account
It can be costly to overcome a language barrier and leave you unbanked or underbanked, meaning you have a checking account with a bank, but also use other financial services.
The people who aren’t provided by the mainstream banks typically rely on more more expensive financial services. For instance, check cashing services could charge fees that range between 1% and 12 percent from the cheque amount.6 It could cost you up to $120 for an amount of $1,000. Banks are able to pay checks to non-customers but this can still entail paying a fee of 5 to $10. For those who are the check due to the fact that they don’t have a bank account, these charges can be thousands of dollars each year.
The process of borrowing money can be costly if you depend on alternative banking services. Solutions such as payday loans or car title loans have significantly higher rates of interest than traditional personal loans. Payday loans, often with annual percentage rates (APRs) at 300% and greater could create the cycle of debt that is hard to escape.7
Each state has different laws regarding payday loans which include what rates of interest and fees can be charged by lenders. Certain payday loans are considered predatory and are regulated in specific states.8
Overcoming Language Barriers in Banking
In recent time there has been a increasing awareness of the effects of language barriers to access to financial services and banking. Both financial service companies and federal agencies are trying to address this problem.
For instance, Mitchell Bank in Milwaukee is among the banks which are opening branches in the areas of low-service. It has a branch called Cardinal Bank in a Milwaukee high school, which has a 70% Hispanic immigrant population.9 Cardinal Bank offers financial literacy classes, which help customers who do not have Social Security numbers to apply in the form of Internal Revenue Service (IRS) Individual Taxpayer Identification Numbers (ITINs) as well as its FDIC Program Money Smart to teach money skills for students and their parents.63
Individuals with little or no English proficiency can also turn to government programs for help with banking services. Many states and large cities have local advocacy for immigrants groups that can help direct customers to local banks offering services, education and outreach in other languages.
In addition, the Consumer Financial Protection Bureau (CFPB) offers support for people who do not have English proficiency. You can call (855) 411-2372 to get support in more than 180 different languages. The CFPB also offers free education materials about banking in a variety of languages.10
Note
Alongside the need to address language barriers, the financial and banking institutions too are taking steps to make banking more accessible to those with speech or hearing disabilities, cognitive disabilities, and visually impaired.
What is it that it means to be unbanked or underbanked?
Unbanked is a term used to describe a situation where you do not have a bank account. Underbanked means the fact that you do have a financial institution accounts, but you also use alternative financial services, such as check cashing services and payday loans.
In what percentages of the United States are unbanked?
Approximately five percent of the U.S. population, or 7.1 million households, was unbanked as of May 2021. The percentage of households that were not banked was significantly higher for Hispanic, Black, and low-income families.3
What problems do bank language barriers cause?
Language barriers can make people who have low English competence (LEP) less likely to use banking or financial services. This can make it harder in managing their money, paying bills, and save money. They may also be more likely to use expensive banking options, for example, check cashing service and payday loans.
Does the bank have translators?
Banks can use automated tools for interpretation and translation to communicate with customers with only a little English proficiency. Banks are increasingly hiring translators and interpreters who can communicate with customers on the phone or in person.
The Bottom Line
Language barriers can make it difficult for individuals to access the banking services or products they need, but steps are being taken to combat this problem within the U.S. As the banking industry becomes more inclusive individuals with less English proficiency might have a better chance of opening bank accounts or apply for loans, and manage their finances without having to pay excessive fees.
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