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Language barriers in banking

The costs of not having a bank account

Banks: Overcoming language barriers

What does it mean to be unbanked or underbanked?

What percentage of people living in United States are unbanked?

What issues do bank language barriers cause?

Does the bank have translators?

The Bottom Line

Personal Finance Banking

The challenge of overcoming language barriers in banking

Language barriers make it hard for some people to be able to access banking services

By Rebecca Lake

The publication was made public on December 02, 2022.

Fact checked by Suzanne Kvilhaug

Within the United States, language barriers make it difficult for non-English-speaking customers to gain access to banking services. Therefore, paying bills and saving money may be more difficult.

Around one-in-12 individuals living in the U.S. speak limited English and a large portion of them are unbanked.1 In the present banks like the Consumer Financial Protection Bureau (CFPB) and community banks are making efforts to bridge the gap in language to help more people gain access to the banking services they need.

Let’s look at the impact of the language barrier in banking and how they are being addressed.

The most important takeaways

People who have limited English within the United States may not have easy access to banking services that they need.

A total of 4.5 percent from the U.S. population is unbanked and therefore do not have a bank account or have access to traditional banking products or services.2

Hispanic households account for 12.2 percent of the unbanked population.

Language obstacles can make it difficult for non-native English users to access banking services, which can make things like paying bills and saving money more challenging.

Initiatives from initiatives of the Consumer Financial Protection Bureau (CFPB) and community banks are helping bridge the language gap.

Language Barriers in Banking

Language barriers can impact people’s access to financial services. A little over 5% of the population within the U.S. were unbanked, or had no bank account, in 2020.3 However, the proportion of communities where English is not the first spoken language is higher. For instance, among Hispanic households, where Spanish is usually the predominant language, 12.2 per cent aren’t banked, according to the 2019 Federal Deposit Insurance Corp. (FDIC) data.4

Nearly 22% or more of U.S. population speaks a language other than English at home — that’s 67.3 million people.5 Many of these people have a good command of English, but many aren’t. One in 12 adults over 5 is considered limited English proficient (LEP) which means that they speak English not very well.1

People and communities that are not fluent in English may have difficulty to get banking services within the U.S. Although banks may provide basic account information or customer services in a range of languages, financial disclosures and written documents may not be accessible in languages other that English. Furthermore, newcomers might have difficulty understanding the way that bank accounts, investments, and other financial products work in the U.S.1

The Consumer Financial Protection Bureau (CFPB) offers numerous tools online to assist Spanish speakers learn more about U.S. banking concepts, products and services.

The Price of Not Being Banked

It is costly to overcome a language barrier and cause you to be unbanked or underbanked. This means you have a checking account with a bank, but also use alternative financial services.

The people who aren’t provided by the mainstream banks typically use more costly financial services. For example, check cashing services can charge fees ranging from 1% to 12% on the total check amount.6 This could mean that you pay between $10 and $120 to cash the check for $1,000. Banks may pay checks to non-customers but this can still entail the payment of a fee ranging from $5 to $10. If you are payed by check since they don’t have a bank account, these fees can amount to thousands of dollars per year.

It can also be expensive if you rely on alternative banking services. Solutions like payday loans or car title loans offer significantly higher interest rates than traditional personal loans. Payday loans typically have annual percentage rates (APRs) at 300% and greater, can create the cycle of debt that’s difficult to escape.7

Every state has its own laws regarding payday lending, including what interest rates and fees can be charged by lenders. Certain payday loans are considered predatory and are not permitted in some states.8

Banks: Overcoming language barriers

In recent time there has been growing awareness of the impact of language barriers on access to banking and financial health. Financial services firms and federal agencies are working to solve this issue.

For example, Mitchell Bank in Milwaukee is among the banks opening branches in underserved areas. It has a branch called Cardinal Bank in a Milwaukee high school, which has a 70 percent Hispanic immigrant population.9 Cardinal Bank offers financial literacy classes, which help customers who do not have Social Security numbers apply for Internal Revenue Service (IRS) Individual Taxpayer Identification Numbers (ITINs), and uses the FDIC money smart program in order to help develop money skills for students and their parents.63

People with limited English proficiency can also look to government programs to help with banking services. Numerous states and major cities have local advocacy for immigrants organisations that can guide people to local banks offering services, education and outreach to other languages.

In addition finally, The Consumer Financial Protection Bureau (CFPB) provides assistance to people who do not have English proficiency. You can call (855) 411-2372 to get help in over 180 different languages. The CFPB also provides training materials on banking in many languages.10

Note

Along with dealing with the issue of language barriers bank and other financial establishments are taking measures to make banking accessible to those who suffer from speech and hearing impairments or cognitive impairments, as well as visual impairments.

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 an account at a bank. Being underbanked implies that you have a bank accounts, however, you are also using alternative financial services, such as check cashing services and payday loans.

How many people in the United States are unbanked?

About 5% of the U.S. population, or 7.1 million households, were not banking at the time of May 2021. The percentage of households that were not banked was higher in Hispanic, Black, and low-income families.3

What issues do banks’ language barriers create?

Language barriers can make those who have low English competence (LEP) more reluctant to seek out banking and financial services. This could make it harder in managing their money, paying off bills, and save money. They may also be more likely to use expensive banking options like check cashing services as well as payday loans.

Are banks equipped with translators?

Banks can make use of automated tools for interpretation and translation to reach out to customers with only a little English proficiency. The banks are now hiring interpreters and translators who can communicate with customers on the telephone or face-to-face.

The Bottom Line

Language barriers can make it difficult for individuals to access the banking services or products they require, however initiatives are being taken to tackle this issue across the U.S. As the banking sector becomes more inclusive individuals with less English proficiency may be able to open bank accounts, apply for loans and monitor their finances without having to pay large fees.