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In the shadow of Wall Street, many go "unbanked"

New York City is a global banking hub, which is why it might seem surprising that many of its residents lack so much as a checking account.

An estimated 825,000 adults, or 13 percent of all New York City households, lack a bank account, according to a report released Friday by the city comptroller's office. That is nearly double the national rate. In at least two neighborhoods in the Bronx, more than half of all residents were classified as "unbanked," meaning they had no relationship at all with a financial institution.

In looking at 74 FDIC-insured banks that do retail banking in New York City, the comptroller's office found that among the 20 banks offering the most affordable combination of fees and opening deposits, the vast majority, or 90 percent, have 25 branches or fewer.

"Our study showed that New Yorkers trying to open their first checking account face a bewildering array of options, and that the bank on your block might not give you the best bang for your buck," Scott Stringer, the city's comptroller, said in a statement that also unveiled an online tool to help New Yorkers find a viable banking option.

"The economic impact of being unbanked or underbanked are severe," Stringer's study said. "On an annual basis, a full-time, minimum wage worker in the State of New York could end up paying $364 in check-cashing fees along, plus the cost of any money orders needed to pay bills."

The City's Community Investment Advisory Board recently found that there are 1.2 branch locations for every 1,000 residents in areas where most people are minorities, compared to 3.6 locations per 1,000 residents in areas that are mostly white. The Bronx has the lowest concentration of bank branches per household of any county in the nation, while also having the lowest median household income of New York City's five boroughs.

Twenty-eight percent of New York City banks did not appear to offer, or widely advertise, a basic checking account, also known as a "Lifeline account," as required by state law, Stringer's office found. A "Lifeline account" should require no more than $25 as an initial deposit, a minimum balance of no more than a cent and a monthly maintenance cap of $3, while also offering at least eight free withdrawals a month and an unlimited number of deposits.

When researchers asked about the accounts, 22 banks could not offer any information about a product that met the requirements, according to the study.

For a low-balance customer in in New York City, the average total cost of maintenance and transaction fees came to $73 a year. The average monthly maintenance fee was $5, or $60 a year, or the equivalent of nearly seven hours of work by a minimum wage worker, Stringer's office said.

Access to an affordable bank account could save hundreds of dollars a year compared to costly alternative financial services, such as check-cashing services. Americans spent more than $89 billion on interest and fees for financial services provided outside traditional banks, an average of $2,400 per underserved family, a 2012 study commissioned by the Inspector General for the U.S. Postal Service found.

Households with a net income of $20,000 paid as much as $1,200 annually for alternative service fees, well above the expense of a checking account, a 2010 study by the Federal Reserve Bank of St. Louis concluded.