Legal Definitions - unbanked

Unbanked describes individuals or households that do not have a formal relationship with a traditional financial institution, such as a bank or credit union. This means they typically do not possess a checking account, savings account, or other standard banking services.

Here are some examples to illustrate this concept:

• Example 1: A recent immigrant to the country secures a job but has not yet established a bank account due to unfamiliarity with the local financial system or a lack of required identification documents. Instead, they receive their wages in cash and pay bills using money orders purchased at a grocery store.

  Explanation: This individual is considered "unbanked" because they do not have a formal account or direct financial relationship with a bank or credit union, relying on alternative methods to manage their income and expenses.

• Example 2: An elderly person living in a remote rural area has always managed their finances by keeping cash at home and paying for goods and services directly with physical currency. There are no bank branches nearby, and they are uncomfortable with online banking, so they have never opened an account.

  Explanation: This person is "unbanked" because they do not utilize the services of a formal financial institution for their savings or transactions, choosing instead to handle their money entirely outside the traditional banking system.

• Example 3: A self-employed artisan sells handmade goods at local markets and receives all payments in cash. They prefer to keep their earnings in a secure place at home and pay for supplies and personal expenses directly with cash, never having seen the need for a business or personal bank account.

  Explanation: This artisan is "unbanked" because, despite running a business and earning income, they do not maintain a formal banking relationship to manage their finances, relying solely on physical currency for all transactions.