NEW YORK, United States (AP) — The number of Americans who do not have a bank account fell to a record low last year, as the proliferation of online-only banks and an improving economy are bringing more Americans into the traditional financial system.

A new report from the Federal Deposit Insurance Corporation (FDIC), issued Tuesday, found that 4.5 per cent of Americans — representing approximately 5.9 million households — were without a bank account in 2021. That’s the lowest level since the FDIC started tracking the data in 2009 and down from 5.4 per cent of Americans in the 2019 survey data.

The decline in unbanked households may partially be attributed to the novel coronavirus pandemic. States and the federal government distributed trillions of dollars in stimulus to Americans after COVID-19 shut down the US economy in March 2020. The benefit programmes largely needed a bank account to send the funds quickly to those impacted.

“During the pandemic consumers opened bank accounts to access relief funds and other benefits quickly and securely,” said FDIC Acting Chairman Martin J Gruenberg in a statement.

But the FDIC attributed most of the improvement to the stronger economy in 2021 as the novel coronavirus pandemic restrictions largely expired and there were low levels of unemployment.

Black and Hispanic households still remain much more likely to not have a bank account, although those figures are improving. Roughly 11.3 per cent of black households are without a bank account, down from 13.8 per cent two years earlier. Among Hispanic households, that figure declined to 9.3 per cent from 12.2 per cent.

The primary reasons someone would choose to be unbanked were largely unchanged from previous surveys. One in five unbanked households said not having enough money to maintain an account was the main reason they went without one — a sign that being unbanked remains an economic inclusion issue.

The FDIC started tracking unbanked Americans in 2009. In the 2011 data the number of Americans who were unbanked rose significantly as a result of the Great Recession. While Americans kept their bank accounts through the novel coronavirus recession, there is a chance the number of unbanked Americans could rise in the future if inflation continues to damage the economy and unemployment increases.

Other households had privacy and trust issues regarding banks. Major companies like Amazon have been tracking consumer data via credit card usage for a while now, but banks are taking advantage of this data too.

Americans outside the traditional financial system face numerous obstacles with their daily finances, which is why policymakers push so hard to get unbanked households to open a savings or checking account. Cheque-cashing services, utility payment services, rent payments without a bank account often come with fees — money that a person with a bank account would not be subject to.

New immigrants and refugees are also among the unbanked. Jhuma Acharya, a former refugee from Bhutan and a case manager with Community Refugee and Immigration Services, in Columbus, said he sees an increase in clients calling him about businesses that won’t accept their cash.

“I have never worked with any single [new] refugee who said they have used a credit card in their life,” Acharya said.

Acharya said clients usually take a minimum of five months to build enough credit with banks in the United States to sign up for an account. In the interim, Acharya said they try to educate clients on how to build up to a debit card and use their Electronic Benefits Transfer card.

There’s also been an increasing number of businesses that no longer accept cash as a form of payment, an issue that several state legislatures have started to address.

Some states and cities mandated cash be accepted prior to the novel coronavirus pandemic, such as New Jersey, Massachusetts, San Francisco and Philadelphia. However, at least seven states — Delaware, New York, Oregon, Arizona, Colorado, Connecticut, and Rhode Island — have passed such Bills since the pandemic began, mainly in response to the growing number of contactless businesses following CDC recommendations to limit cash use for fear of spreading the virus.

At least three Bills in Republican-majority states Florida, Mississippi and North Dakota have died in committee, as well as two Bills in mostly Democrat-held New Hampshire and Wisconsin.

In Ohio, State Sen.ator Louis Blessing III, R-Colerain Township, introduced a Bill during the 2021 legislative session that would open businesses up to lawsuits if they do not accept cash as payment. Blessing cited protecting immigrant and impoverished communities as a driver of the Bill, as well as safeguarding consumer data privacy and the elderly, who are more likely to use cash.

The Bill is still currently pending in the Ohio legislature.

The survey also found that the percentage of what are known as underbanked households — those who have a bank account but still use high-cost financial services like cheque-cashing, pawn shops, payday loans, and remittances — also declined.

The FDIC also found that roughly half of all American households used a non-bank payment service such as CashApp, Venmo or PayPal in 2021.