Language Barriers in Banking
The costs of not having a bank account
Banks: Overcoming language barriers
What is it to be underbanked or unbanked?
What percentage of people living in United States are unbanked?
What issues do banks' language barriers create?
Do banks have translators?
The Bottom Line

Personal Finance Banking

Banks: Overcoming language barriers

Language obstacles make it difficult for some individuals to gain access to 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 hinder non-English speakers to access banking services. Therefore, paying bills and saving money may be more difficult.

Around one-in-12 residents living in the U.S. speak limited English and many are unbanked.1 In the present, there are steps being taken by the Consumer Financial Protection Bureau (CFPB) and community banks are working to close the language gap to help more people gain access to the banking services that they require.

Let's examine the effects of language barriers in banking and how they can be addressed.
The most important takeaways

People who aren't fluent in English on the United States may not have easy access to banking services that they need.
An estimated 4.5 percent from the U.S. population is unbanked which means they don't have a bank account or use traditional banking products or services.2
Hispanic households make up 12.2 percent of the bank-inactive people.
Language issues can make it hard for non-native English users to get access to banking services, which can make paying off bills as well as saving cash more challenging.
Initiatives from the Consumer Financial Protection Bureau (CFPB) and community banks are helping to reduce the gap in language.

Language barriers in banking

Language barriers can hinder people's access to financial services. About 5% people within the U.S. were unbanked, or did not have a bank account in 2020.3 However, the proportion of communities where English isn't the main language is significantly more. For example, among Hispanic households, in which Spanish is often the primary langue, 12.2 per cent aren't banked, according to the 2019 Federal Deposit Insurance Corp. (FDIC) data.4

About 22% of the U.S. population speaks a language other than English at home, which is 67.3 million people.5 A lot of these people are proficient in English however, many of them don't. One in 12 adults over five is considered to be limited English competent (LEP) which means that they can speak English less than well.1

Communities and individuals who aren't proficient in English may have difficulty to get banking services within the U.S. Although banks may provide basic account information or services in a range of languages financial disclosures, as well as written documents may not be available in other languages that English. Additionally, foreigners may struggle to understand the way that bank accounts, investments and other financial products operate in the U.S.1

The Consumer Financial Protection Bureau (CFPB) provides a variety of online tools to help Spanish people better understand U.S. banking concepts, products and services.
The costs of not having a bank account

It can be costly for a language barrier to leave you unbanked or underbanked. This means you have a bank account , but you also have other financial services.

People who are not well provided by the mainstream banks typically rely on more more expensive financial services. For instance, check cashing services could charge fees that range from 1% to 12 percent of the check amount.6 That can mean paying between $10 and $120 to cash an amount of $1,000. Banks are able to pay checks to non-customers but this can still entail the payment of a fee ranging from $5 to $10. For people who get paid by check because they do not have a bank account, these charges can add up to thousands of dollars each year.

The process of borrowing money can be expensive if you rely on alternative financial services. Alternatives like payday loans or car title loans have significantly higher rates of interest than traditional personal loans. Payday loans, often with APRs (APRs) at 300% and more could create an unsustainable cycle of debt that's difficult to escape.7

Every state has its own laws regarding payday loans, including what interest rates and fees can be charged by lenders. Certain payday loans are considered predatory and are regulated in specific states.8
Banks: Overcoming language barriers

In recent time there has been rising awareness of the effect of language barriers on access to banking and financial health. Both financial service companies and federal agencies are trying to solve this issue.

For example, Mitchell Bank in Milwaukee is among the banks opening branches in underserved areas. There is a branch known as Cardinal Bank in a Milwaukee high school, which has a 70 percent Hispanic immigrants population.9 Cardinal Bank offers financial literacy classes, which help customers with no Social Security numbers to apply to apply for Internal Revenue Service (IRS) Individual Taxpayer Identification Numbers (ITINs) as well as the FDIC Money Smart program to teach the financial literacy of students and their parents.63

Individuals with little or no English proficiency can also seek out government programs for help in banking. A lot of states and cities have local advocacy for immigrants organizations that can direct people to local banks that provide assistance, education, and outreach in other languages.

Finally, the Consumer Financial Protection Bureau (CFPB) offers support for people who do not have English proficiency. You can call (855) 411-2372 to get help in over 180 languages. The CFPB also provides training materials on banking in dozens of languages.10
Note

Alongside the need to address language barriers bank and other financial establishments are taking measures to make banking accessible to people who suffer from speech and hearing impairments, cognitive disabilities, and visually impaired.
What is it that it means to be unbanked or underbanked?

Being unbanked implies that you don't have an account at a bank. Underbanked means the fact that you do have a financial institution account however, you are also using alternative financial products, such as cashing checks and payday loans.
In what percentages of the United States are unbanked?

Around 5% of the U.S. population, or 7.1 million households, were unbanked as of May 2021. The percentage of households that were not banked was disproportionately higher among Hispanic, Black, and low-income families.3
What issues do bank language barriers cause?

Language barriers can make people who have low English competence (LEP) more hesitant to seek out banking and financial services. This can make it more difficult for them in managing their money, paying bills, and save money. They could also be more likely to make use of costly banking alternatives, for example, check cashing service and payday loans.
Does the bank have translators?

Banks are able to use automated tools for interpretation and translation to communicate with customers who have only a little English proficiency. More banks are hiring translators and interpreters who can talk to customers via phone or in person.
The Bottom Line

Language barriers can make it difficult for those with limited English to obtain the banking services or products they need, but efforts are being made to combat this problem in the U.S. As the banking sector becomes more inclusive, people with limited English proficiency might find it easier to open bank accounts and apply for loans and maintain their finances without having to pay high fees in the process.
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