The unbanked in NYC mostly cheating the welfare system

1 in 10 New Yorkers don’t have bank accounts

Worried New Yorkers are stuffing record piles of cash under the mattress.

In the wake of the Great Recession, more local residents, fearing wage garnishment and social upheaval, have abandoned banks, which are already exacerbating customer flight by jacking up fees in a low-interest-rate environment.

“More and more people in New York we talk to today than ever before are unbanked,” said financial counselor David Flores of GreenPath Debt Solutions. “We call them the liquid society.”

The unbanked are a growing category of New Yorkers — almost one in 10 households in New York State, according to the most recent FDIC survey — who have no checking or savings account at a bank. And the category of New Yorkers who conduct some or all of their financial transactions outside the banking system is 29 percent, almost 1 percent higher than the total for all US households.

A study put the number of unbanked New York City households at 13 percent, or more than 825,000 adults, according to the FDIC study. And nationwide, 8.2 percent of households are unbanked, up from 7.6 percent in 2009.

Unemployment, underemployment and poor credit history, which push banks to weed out risky applicants, are cited for the trend. Flores says clients who’ve had a past run-in with a bank over unpaid overdraft fees, for example, may have trouble opening a new account. Their outstanding debt can show up in a credit report.

Now fears of a natural disaster or of a social meltdown (stoked by talk show hosts), have joined the list of reasons consumers are hiding money at home. “Keeping money at home provides emotional comfort,” said financial adviser Joseph P. Okaly of New Horizons Wealth Management. “It’s not unreasonable after Hurricane Sandy to see the need to keep some cash at the ready.”

The numbers of unbanked, meanwhile, are expanding in New York’s inner city with its large concentration of immigrants. The numbers are especially high among minorities and low-income households, according to Flores. That’s part of a broader national phenomenon highlighted in the latest America Saves survey, which showed that 13 percent of its savers were now keeping their money in a “safe place” at home, and earning no interest.

“Personally, I’ve talked to a number of individuals who were unbanked because they were concerned their public assistance would go away if they opened an account,” said Flores. “They had misconceptions that if they had an account it would impact their public assistance.”

In a study last year, New York City’s Department of Consumer Affairs showed stunning disparities among the unbanked in the city’s immigrant communities. Only 5 percent of Chinese respondents in the US less than six years on average were still unbanked. Yet Ecuadorian and Mexican respondents, in the US nearly 12 years and 10 years on average, respectively, were hugely unbanked at 35 percent and 57 percent.

“The demographics will determine how New Yorkers are saving their money,” Flores said. “The more affluent individuals may have savings accounts, the less affluent in the inner city will have their money under the mattress — and your trust or distrust of the bank will also determine how you save