Banking Black isn’t a new concept, but it’s gaining momentum amid the rise of the Black Lives Matter movement. But what does it mean to bank Black?
According to the Urban Institute, a Black financial institution provides services to minority communities and is 51% or more Black-owned.
Black financial institutions have been around for centuries, with initial meetings among African-Americans interested in establishing their own banks held as far back as 1851 — before the Civil War. However, the first Black-owned bank in the U.S. didn’t materialize until after the war, in 1888.
The first Black-owned banks enabled African-Americans to accumulate enough capital to start other service-oriented businesses like nursing homes, catering businesses and insurance companies. And they provided an opportunity for African Americans to learn accounting skills and other techniques required for handling large volumes of cash.
Today, there are roughly 19 Black-owned banks in the U.S. offering the same services as other financial institutions, such as certificates of deposits, loans, online and mobile banking assistance and more. This number used to be much higher — in 2001, there were 48 Black-owned banks — but, as with other community banks, the numbers have dwindled over the years partially due to regulatory restrictions that often favor larger financial institutions.
As we celebrate Black History Month, we would like to pay homage to the Black-owned financial institutions that have served as pillars in the African-American community for years now.
Why you should consider banking Black
It’s no secret there’s a wealth gap between minority and non-minority households. As of 2016, the median wealth for a White family was $171,000 compared to $17,600 for a Black family.
This is partly attributed to a lack of financial services in minority communities. Without financial inclusion, minorities can’t affordably save, invest and insure themselves, which is required to grow and sustain wealth. This lack of experience also places them at a disadvantage.
“I believe it is vital that African Americans make financial literacy a priority in 2020 and beyond, especially because of the effects of the coronavirus. Over 67% of Americans cannot pass a basic financial literacy test. African-Americans, on average, can only answer less than 40% of financial literacy questions correctly. According to research, African-Americans have the lowest levels of financial literacy,” states Dr. JeFreda R. Brown, personal finance consultant, educator and CEO of Provision Financial Education.
Because of financial exclusion, minorities often resort to expensive financial services, such as check cashing stores and pay-day lenders, because there are fewer banks in their neighborhoods. There are roughly 41 financial institutions per 100,000 people in a White community compared to only 27 in non-White majority communities. And the financial institutions present in minority neighborhoods often make it difficult to open and maintain an account. For example, a bank may require higher account balances to eliminate service charges or a larger minimum account balance. According to one study, the average minimum account balance at banks in Black neighborhoods is $871, compared to $626 in White communities.
Because of this, nearly half of Black households are either underbanked or lacking access to such institutions.
“Earning money is not a problem for African-Americans,” says Dr. JeFreda R. Brown. “However, there is a large gap for African-Americans when it comes to personal finance education, understanding how money works, understanding economics and economic indicators, understanding time value of money and understanding wealth building.”
Many Black-owned banks aim to combat the wealth disparity gap through:
- community development lending
- supporting minority businesses and nonprofits
- offering financial literacy workshops for community members
- providing financial aid to underserved Black communities
“I think banking with Black-owned banks is good because many of them give people a second chance who can’t get bank accounts with other banks,” says Dr. JeFreda R. Brown. “Also, Black-owned banks offer the same services as other banks and credit unions.”
In 2016, there was a rise in support for Black-owned businesses following the Black Lives Matter movement. One initiative was the Black Money Matters movement, headed by rapper Michael “Killer Mike” Render. He made a call for action in July 2016 during a town hall meeting televised by BET, asking Blacks to “bank Black.” It was an effective yet short-lived effort that led to 8,000 new accounts at Atlanta’s Black-owned Citizens Trust Bank. In addition, One United Bank reported receiving $3 million in deposits at branches across the country, and Carver Bank witnessed $2.4 million in deposits thanks to the movement.
There is also the Bank Black Challenge, which was launched by One United Bank, that is challenging one million people to open a $100 savings account at a Black-owned bank to generate $100 million of economic power. This challenge started in 2016 and is still ongoing today.
Initiatives like these are significant, but it requires ongoing support to make their effects long-lasting. In 2020, the current Black Lives Matter (BLM) movement is motivating people to support the Black community in new ways. And by banking with Black financial institutions, you can now play your part in reinvesting in the Black community in the U.S.
“Black-owned banks should be given a chance to grow and be a strong financial staple in the communities they serve. Also, Black-owned banks are a great option for anyone because they promote economic revitalization. Banking with Black-owned banks helps increase community development and economic development. This is why they need support from everyone,” states Dr. JeFreda R Brown.
Black-owned banks and credit unions
If you’re considering banking with a Black financial institution, check out this list of Black-owned banks and credit unions in the U.S. If you don’t see a bank listed in your area, keep in mind you may still be able to use the bank’s digital banking services.
(1) Alamerica Bank – located in Birmingham, Ala.
(2) Citizens Trust Bank – located in 15 cities across the U.S.
(3) Columbia Savings and Loan – located in Milwaukee, Wyo.
(4) Commonwealth National Bank – has two locations in Mobile, Ala.
(5) Broadway Federal Bank FSB – two locations in Los Angeles, Calif. and one in Inglewood, Calif.
(6) Carver State Bank – two locations in Savannah, Ga.
(7) Carver Federal Savings Bank – located in three cities in N.Y.
(8) Columbia Savings & Loan ASSN – located in Milwaukee, Wyo.
(9) GN Bank – located in Chicago, Ill.
(10) First Independence Bank – located in two cities in Mich.
(11) Harbor Bank of Maryland – located in three cities in Md.
(12) Liberty Bank & Trust CO – located in 10 cities across the U.S.
(13) Industrial Bank NA – has multiple locations in N.Y., Md. and N.J.
(14) OneUnited Bank – located in three cities across the U.S.
(15) Optus Bank – located in Columbia, S.C.
(16) Mechanics & Farmers Bank – located in five cities in the Carolinas
(17) Tri-State Bank of Memphis – located in Memphis, Tenn.
(18) Unity National Bank – located in three cities in Texas and Ga.
(19) United Bank of Philadelphia – located in Philadelphia, Pa.
Considering making the switch?
Black-owned financial institutions are struggling.
In 2013, 60% of Black banks lost money, and they were especially hit hard by the 2008 recession. As we enter yet another economic downturn, now is a great time to invest in Black banks. In doing so, you can help keep these entities afloat so that minority communities can continue working to close the disparity gap.
Together, Black banks control $5 billion in assets, which is a fraction of what the banking giants have (for example, Wells Fargo has $1.7 trillion in assets alone). It’s up to the people to help grow Black financial institutions in the U.S. If you’d like to make a difference, then follow these simple steps to switch to a Black-owned bank.
Step 1: Identify your banking needs
Are you currently banking with another bank? What do you like and dislike about it? Keep this in mind as you’re shopping for a new, Black-owned bank. Maybe you like the mobile banking options your current bank offers but hate the high monthly fees. Or perhaps you want to do your banking with an institution that has more involvement in minority communities. Make a list of your must-haves to help you decide on the best Black banking solution for your needs.
Step 2: Choose a new banking institution
After you’ve identified your list of banking needs, it’s time to search for a Black-owned financial institution that meets those requirements. Use the list of Black-owned banks and credit unions above to start your search. Create a list of options and mark off the ones that don’t make the cut.
Step 3: Take note of your automatic payments and deposits
Do you use automatic withdrawals for your billing? How about direct deposits from your employers (or clients)? If so, you’ll need to make a list of these automatic transactions so you can set them up with your new bank.
Step 4: Open up your new account
Once you’ve found a bank that meets your needs, it’s time to create your new account. Go through the application process and schedule to make a deposit (if required). Also, check with your new bank to determine what process they have to make transferring funds from your old bank easier. Once your account is up and running, don’t forget to schedule your automatic payments and deposits.
Deciding to bank Black isn’t just about choosing where you keep your money. It’s a way to take a stand against inequality in minority communities that lack financial inclusion. And it helps push the Black Lives Matter movement forward.
In 2012, Wells Fargo was sued for pushing Blacks toward more expensive mortgages with higher fees and rates (compared to white borrowers with similar credit). Then in March 2018, Bank of America was fined for racial discrimination in its hiring and lending practices.
Unfortunately, this is an ongoing issue for people of color who receive less than 1% of mortgages from white-owned banks.
Banking Black isn’t a choice only available to African Americans, either. It’s a viable option for anyone who wants to make a difference in their financial prosperity, as well as the prosperity of those in underserved communities. We welcome your feedback on this article.
Source: The Simple Dollar Contact at [email protected] with comments or questions.