{"id":22941,"date":"2026-01-20T13:01:58","date_gmt":"2026-01-20T13:01:58","guid":{"rendered":"https:\/\/budgetadirect.com\/?p=22941"},"modified":"2026-01-20T13:02:00","modified_gmt":"2026-01-20T13:02:00","slug":"the-hidden-costs-of-living-in-a-banking-desert","status":"publish","type":"post","link":"https:\/\/budgetadirect.com\/?p=22941","title":{"rendered":"The Hidden Costs of Living in a Banking Desert"},"content":{"rendered":"
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In her half-century on earth, Torry Holmesly has been subjected to neglect, violence, eviction and homelessness. So, if you ask her about what life is like in a banking desert, forgive her for looking at you funny.<\/p>\n

And yet, Holmesly, 50, is far from a fool. She knows that not having a nearby and trustworthy bank or credit union has cost her \u2014 of savings and peace of mind, of her dream of buying a home and, lately, of avoiding a predatory auto loan.<\/p>\n

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\u201cThe banks would come and they go,\u201d says Holmesly, who moved her two daughters to Azle, Texas, in 2009 after a \u201cchurch lady\u201d met them at a shelter and helped them find a place to stay. <\/p>\n

\u201cI mean, there was one building in Azle that was three different banks in the time that I\u2019ve been there\u2026 and their fees were outrageous.\u201d<\/p>\n<\/div>\n<\/div>\n

A banking desert is <\/em>a census tract without a bank branch within two to 10 miles depending on the community\u2019s size, according to Fed Communities, a collaboration among the 12 Federal Reserve Banks. At first glance, anyone who\u2019s well versed in transacting online might not fully understand the pain of having no nearby branches. There are countless online-only banks that offer high yields and low fees, as Bankrate\u2019s reviews and reporting demonstrate.<\/p>\n

However, an investigation by Bankrate \u2014 spending two days in separate \u201cdeserts,\u201d interviewing seven residents, surveying 16 experts and examining government data \u2014 reveals high costs for people left behind by the rise of online banking if they don\u2019t have reliable Internet access or aren\u2019t comfortable using this new technology.<\/p>\n

These costs are highest in banking deserts. Without a nearby branch, people resort to banking in places that give them a bad deal: expensive check-cashing services, predatory payday lenders, used car lots or high-interest pawn shop loans. For folks like Holmsley, these high-cost alternatives to traditional banking aren\u2019t just inconvenient expenses. They\u2019re an unavoidable strain of daily life that can leave people battling debt instead of building wealth.\u00a0<\/p>\n

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\n Life in America’s banking deserts\n <\/p>\n

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About 12.3 million Americans live in banking deserts \u2014 roughly the size of Illinois\u2019 population. Another 11.2 million reside in potential deserts, thanks to big banks\u2019 ever-quickening race to optimize their branch locations for profit. Between 2019 and 2025, in part fueled by the COVID-19 pandemic, branch locations fell by 6.6%, and the number of people residing in banking deserts increased by 785,000.<\/p>\n<\/p><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<\/section>\n

As reporters at Bankate, we realize that banking deserts aren\u2019t a new phenomenon. Yet the fact that they\u2019re still causing harm to consumers means they require a new look through a fresh lens. <\/p>\n

Our goal is to shine a light on the institutions taking advantage of banking desert residents \u2014 and where we can, hold them accountable for it. And we\u2019re committed to documenting the experiences of those who, like Holmsley, are negatively impacted \u2014 and empowering them. Thankfully, some solutions are in the works, but they\u2019re not yet enough to protect everybody.\u00a0<\/p>\n

Holmesly has experienced the burdens of living in banking deserts\u00a0<\/h2>\n

Holmesly\u2019s Azle, Texas (U.S. Census Tract 1404.15 in Parker County) is officially a banking desert, according to the Federal Reserve\u2019s banking deserts dashboard. Fed data shows that the number of bank-barren towns is still growing \u2014 albeit more slowly than during the pandemic \u2014 and includes some areas you might be surprised by.\u00a0<\/p>\n

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Federal Reserve Banking Deserts map<\/em><\/figcaption><\/figure>\n

Like anyone, Holmesly, who currently lives in a rent-to-own RV working 40 to 70 hours per week as a caretaker, needs banks. If she can find one to refinance her upside-down auto loan, her goal of buying a property \u2014 or at least finding a piece of land to park her RV for good \u2014 would be more realistic.<\/p>\n

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\u201cThere\u2019s no place out in Azle except for used car lots, stuff like that,\u201d she says. <\/p>\n

\u201cAnd the banks out here, it\u2019s like the little bank inside Walmart. There\u2019s no credit unions or anything like that anywhere near.\u201d<\/p>\n<\/div>\n<\/div>\n

Not having a traditional bank branch nearby comes with a load of costs, some that can be named in dollars and cents and others that can\u2019t.<\/p>\n

Lack of in-person assistance<\/h3>\n

Among people who don\u2019t have an online savings account, 45% say they prefer access to a branch, Bankrate found. Without a nearby branch, you miss out on the opportunity for in-person transactions \u2014 for example, the chance to talk with a teller if you\u2019ve overdrawn an account or been the victim of bank fraud.<\/p>\n

\u201cI love those stories where a bank teller, by the third time that the elderly person came in and got a money order for ten thousand dollars, and they start to ask questions: \u2018Hey, do your kids know about this? Where are you sending this money?\u2019\u201d says Sam Hohman, the CEO of debt counseling agency Credit Advisors Foundation. <\/p>\n

The quality of in-person assistance adds another layer to the banking desert conversation, though. A physical structure is one thing, but what\u2019s really missing from banking deserts is the offerings that take place inside. That\u2019s the message from Hohman, whose organization has partnered with First National Bank of Omaha to put credit counselors in the branch lobbies of lower-income areas. <\/p>\n

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\n If your bank [has] the brick and mortar, but they’re not really offering any services, does it really matter that they’re there?<\/q>
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\n \u2014 Sam Hohman, CEO, Credit Advisors Foundation
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The service is critical because it can cover your blind spots \u2014 we all have them. Just by talking it out with a teller, banker or branch manager, you might learn that you have more loan or deposits options than you initially realized. They could help you understand, for instance, the value in securing auto loan preapproval from reputable financial institutions before you walk onto a used car lot and accept its financing at face value.<\/p>\n

Money orders and check-cashing fees<\/h3>\n

Those without a checking account or a nearby bank branch often need to resort to currency exchanges for money orders or check cashing \u2014 and there\u2019s usually a fee involved. Such providers often charge $2 to $8 to cash a check, Bankrate data shows \u2014 although cashing larger checks may come with a higher fee or a set percentage of the check\u2019s amount. Holmesly relied on Cash App and its $2.50 ATM withdrawal fee (on top of the ATM operator\u2019s cost, among other surcharges), to her detriment, she says.<\/p>\n

These fees add up over time: A full-time worker without a checking account could potentially save up to $40,000 during their career by relying on a lower-cost checking account instead of check-cashing services, the Brookings Institution reported in 2008. When factoring in inflation, that\u2019s the equivalent of around $60,000 in 2025.<\/p>\n

Becky House, director at nonprofit credit counseling agency American Financial Solutions, works with clients without easy access to banks. <\/p>\n

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\n \u201cWe have a client who lives in the city, but getting to a bank is difficult due to transportation, work and family obligations. She cashes her paycheck at a local store and uses money orders to pay bills. All of those activities cost her extra money\u2026 It works, but it\u2019s costly and limits her ability to save or build credit.\u201d<\/p>\n

\n \u2014 Becky House, Director of Strategic Initiatives, American Financial Solutions<\/cite>\n <\/p>\n<\/blockquote><\/div>\n<\/p><\/div>\n<\/div>\n

Payday loans and other high-interest borrowing<\/h3>\n

Unbanked consumers in banking deserts have reduced access to conventional loans or credit cards, so some resort to high-interest payday loans. For this predatory form of financing, a borrower gives the lender a personal check for the loan amount, plus a finance charge, and the lender agrees not to cash it until the borrower\u2019s next payday.\u00a0<\/p>\n

A typical two-week payday loan with a fee of $15 per $100 is roughly equivalent to an APR of nearly 400%. Credit card APRs, on the other hand, average just under 20% APR, according to Bankrate data.<\/p>\n

At the typical charge of $15 per $100, a $300 payday loan would cost you $345 to pay back, per the CFPB. What\u2019s more, 4 out of 5 payday loans are rolled over or renewed within two weeks, the agency reported years ago. Such a rollover could bring the same loan to a new balance of $390. According to the CFPB, that\u2019s effectively a $90 charge for borrowing $300 for just four weeks.<\/p>\n

Consumers who aren\u2019t underbanked have access to a number of safer borrowing options, including payday alternative loans (which typically have APRs capped at 28%) from credit unions. They might even be able to access a personal loan with a more reasonable interest rate on their own or by piggybacking onto the better credit of a family member, if necessary.<\/p>\n

ATM fees<\/h3>\n

Say you bank with a smaller financial institution but don\u2019t have in-network ATMs nearby. If you need cash, you might have to visit an out-of-network ATM, which often comes with two fees:<\/p>\n