Smart Accounts are Smart Business
How financial institutions can give “unbankable” people a way to get back in the game — and a place to belong
The words “inclusive” and “banking” don’t always go together. Remarkably, not everyone qualifies for a checking account due to bad credit or a pattern of overdrafts beyond their control.
Can “Unbankable” People Belong?
When Brandi McKnight, VP of Mortgage Servicing at Clearwater, realized there were people in the Missoula community who were considered “unbankable,” she knew there had to be a better way.
So did Bill St. John, Clearwater’s Executive Vice President of Growth. Together, Brandi and Bill set out to ensure that every Montanan had a place to bank and belong.
The Stakes are High for Struggling Families
“It hits home for me to see people going to retail stores to cash a paycheck or reload their debit card because I know the fees they pay to do that,” Brandi said. “Sparing them these fees could mean extra groceries for a struggling family.
The Real Challenge
Brandi’s and Bill’s concern for the growing number of unbanked Montanans was well-founded.
In 2016, the Center for Responsible Lending (CRL) conducted a study called “How Overdraft Fees Harm Consumers and Discourage Responsible Bank Products.” That study found that consumers paid nearly $14 billion annually in overdraft fees, ultimately forcing some consumers out of the banking system altogether.
For unbanked Montanans, the existing options were not sufficient. While they could have a savings account, they couldn’t get a spending account — which is both inconvenient and costly, considering check-cashing service fees and the excessive cost of using prepaid cards to load money, check balances, or use an ATM.
Developing a Solution
Brandi and Bill wanted to prove that it was possible to welcome underserved Missoulians into our credit union family and give them the opportunity to thrive.
They wanted an account that:
- Eliminated the potential for overdraft fees
- Worked like a debit card
- Allowed members an entry point into successful banking
So they developed Smart Spend: the account that gives previously unbanked members access to services at about a third of the cost.
SmartSpend Opens Doors for Underserved People
Clearwater Credit Union rolled out the program slowly, conducting a field test in 2015 with one member piloting the program. We’ve since opened 608 accounts, many of which have transitioned to traditional draft or checking accounts. Some members have even continued this program after moving out of state.
Senior Vice President of Branch
— Bill St. John,
Helping Members Move Forward
As of 2023 programs like the one developed at Clearwater, Americans now pay just under $6 billion a year in overdraft fees*. That’s a significant and welcomed decline of $8 billion dollars. A product like Smart Spend not only proves that banking can — and should — be more inclusive. It also proves that doing the right thing can effectively help our members move forward in their lives and achieve greater things.
*According to consumerfinance.org
This story was originally published on December 12, 2018.