The Center for

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The Center for
Community CapitalismWelfare, Work, Banking, and
CreditPreliminary Findings from The North
Carolina Financial Services SurveyMichael A.
Stegman Robert FarisUniversity of North
CarolinaSeptember 26, 2002
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Genesis of the North Carolina Financial Services
Survey (NCFSS)

• People with bank accounts are more than twice as
  likely to hold savings, as are people who are
  unbanked, and to add to their savings at least
  monthly basis.
• Controlling for income other factors,
  lower-income individuals with bank accounts are
  43 more likely to have positive net assets of
  any kind.
• For more than of the unbanked, their only asset
  is their car.
• In 1998, 10 of all American families were
  unbanked, including 25 of African Americans
  Hispanics, nearly half of all TANF recipients.

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The North Carolina Financial Services Survey

• Telephone Survey of 1501 low-income households in
  NC with incomes lt30,000
• Survey conducted Dec. 15, 2000-Jan. 23, 200
• Over-sampled Hispanics, current TANF recipients
  and recent leavers households in Mecklenburg
  County Wilson
• Weighted to be representative of all low-income
  families in NC
• Study conducted for the NC Department of Health
  Human Services

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Control Variables

• The findings I will highlight hold even when
  controlling for race/ethnicity, welfare status,
  household composition, age, education, income,
  employment status, banking status, housing
  tenure, savings behavior, participation in
  financial education course, and asset holdings,
  including owning a car, CD, stocks or bonds,
  retirement account, or business.

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Welfare Effects
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Recent vs. Current TANF Recipients

• Compared to current TANF Recipients, leavers
• Have significantly greater credit card debt (720
  vs. 598)
• 1.6 times more likely to delay paying off credit
  card debt
• 1.3 times more likely to have been referred to a
  credit counselor
• Just as likely to own a bank account or credit
  card, frequently use payday lenders or pawnshops,
  to have been called by a bill collector, or to
  have multiple credit problems.

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TANF vs. Non-Welfare Families

• Compared to non-welfare, low-income families,
  current TANF recipients
• Have significantly lower credit card debt
• Are 30 less likely to own a bank account
• Borrow more frequently from pawnshops
• Almost twice as likely to have been called by a
  bill collector.
• Just as likely to own a credit card, pay off
  credit card debt, bounce checks, frequently
  borrow from payday lenders, been referred to a
  credit counselor, or have multiple credit
  problems.

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Leavers vs. Non-Welfare Families

• Compared to Non-Welfare, Low-Income Families,
  recent TANF recipients
• 1.4 times more likely to own a bank account
• Have significantly greater credit card debt
• 1.5 times more likely to delay paying credit card
  debt
• Borrow from pawnshops significantly more often
• More than twice as likely to have been referred
  to a bill collector
• Just as likely to own a credit card, frequently
  borrow from payday lenders,seeing a credit
  counselor, frequently bounce checks, or have
  multiple credit problems.

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Race and Ethnicity Effects
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African-Americans vs. Whites

• Compared to households headed by whites,
  low-income households headed by African
  Americans
• 50 as likely to own a bank account
• 2.6 times more likely to borrow frequently from
  payday lenders
• 60 more likely to have been referred to credit
  counselor
• Twice as likely to frequently bounce checks
• 1.5 times more likely to have multiple credit
  problems.
• Just as likely to own credit card(s), repay
  credit debt, or frequently use pawnshops.

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Hispanic vs. Non-Hispanic Whites

• Compared to households headed by Non-Hispanic
  Whites, low-income households headed by
  Hispanics
• 75 as likely to own a bank account
• Significantly lower credit card debt
• Twice as likely to pay off credit card debt
  promptly
• 30 as likely to borrow frequently from payday
  lenders
• One-third as likely to frequently bounce checks
• 30 as likely to be called by bill collector
• 35 as likely to have multiple credit problems
• 6 times more likely to frequently pawn
• Just as likely to own credit card(s), or
  frequently use payday lenders.