Board of Governors of the Federal Reserve System

Banking and Credit

Access to financial services from banks and credit unions can be important for people's financial well-being. Most adults had a bank account and were able to obtain credit in 2023, but notable gaps in access to financial services still exist, particularly among those with low income, Black and Hispanic adults, and those with a disability.

Use of relatively new financial services like cryptocurrency for transactions and Buy Now, Pay Later (BNPL) remained low compared with use of traditional payment and credit methods. That said, while still low overall, use of these newer products tended to be higher among lower-income adults and among Black and Hispanic adults.

Bank Account Ownership

Six percent of adults were "unbanked" in 2023, meaning neither they nor their spouse or partner had a checking, savings, or money market account. This share was unchanged from 2022.

Unbanked rates remained far higher among low-income adults. Twenty-three percent of adults with income below $25,000 were unbanked compared with 1 percent of adults with income of $100,000 or more. Unbanked rates were also higher among younger adults, Black and Hispanic adults, and adults with a disability (table 18).

Table 18. Unbanked rate (by demographic characteristics)

Overall, 12 percent of adults with a bank account said they paid an overdraft fee in the prior 12 months, nearly unchanged from 2022. Among banked adults, higher shares of those with low or middle income, Black and Hispanic adults, and adults with a disability paid an overdraft fee in the prior 12 months (table 19).

Table 19. Paid an overdraft fee in the prior year (by demographic characteristics)

Nonbank Check Cashing and Money Orders

Some people go outside of traditional banks and credit unions for certain financial services. Fourteen percent of adults used nonbank check cashing or money orders in 2023. This share was similar to 2022 yet down 3 percentage points from 2019, before the pandemic.

Both banked and unbanked adults used nonbank providers to conduct financial transactions, but the unbanked were much more likely to have done so. Twelve percent of banked adults used a nonbank money order or check cashing service, compared with 33 percent of unbanked adults (figure 22).

Use of nonbank money orders and check cashing has fallen among both unbanked and banked adults since 2019, although use has flattened out over the past couple of years (figure 22). One reason for the decline since 2019 may be that people have substituted away from money orders and check cashing services to other nonbank products and services not asked about on the survey. The market for financial products and services continues to evolve, particularly in the digital space.

Similar to demographic patterns in bank account ownership, use of nonbank check cashing and money orders was more common among those with lower income, Black and Hispanic adults, and adults with a disability (table 20). Use among Black adults was particularly high at about 3 in 10.

Table 20. Use of nonbank check cashing or money order (by demographic characteristics)

Cryptocurrency

Cryptocurrencies are relatively new digital assets that may be held as an investment or used for making financial transactions.³⁵ Use of cryptocurrency for either purpose continued to fall in 2023. Overall, 7 percent of adults held or used cryptocurrency in 2023, down 3 percentage points from 2022 and down 5 percentage points from 2021 (table 21).

Table 21. Cryptocurrency use

Buying or holding cryptocurrency as an investment remained more common than using it for financial transactions. Seven percent of adults bought or held cryptocurrency as an investment in the prior 12 months. In contrast, 2 percent of adults said they used cryptocurrency to make a financial transaction: 1 percent used cryptocurrency to buy something or make a payment, and 1 percent used it to send money to friends or family (table 21).³⁶

While only a small share of adults used cryptocurrency to send money to friends or family, the survey asked those who did if the recipient was outside of the United States. Over the past two years, one-fourth of adults who used cryptocurrency to send money to friends or family indicated that at least one transfer was made internationally.³⁷

The survey asked those who used cryptocurrency to make financial transactions for the main reason they did so (table 22). At nearly 3 in 10, the most cited reason was that the person or business receiving the money preferred cryptocurrency, followed by ability to send the money faster and for privacy concerns. Relatively few transactional cryptocurrency users indicated that either safety (7 percent) or a lack of trust in banks (4 percent) contributed to this choice.

Table 22. Main reason people used crypto-currency for financial transactions

Use of cryptocurrency differed across demographic and socioeconomic characteristics (table 23). Use was more common among younger-to-middle age adults and among men, both for investment and transactions.

Table 23. Cryptocurrency use (by demographic)

In contrast with age and gender, patterns by income, race, and ethnicity differed by whether the cryptocurrency was used for investment purposes or to conduct financial transactions. Adults with income of $100,000 or more were more likely than adults with lower incomes to hold cryptocurrency as an investment, whereas those with income less than $25,000 were more likely than those with higher incomes to use cryptocurrency for financial transactions. Looking across race and ethnicity shows that holding cryptocurrency as an investment was most likely among Asian adults. In contrast, use of cryptocurrency for financial transactions was more common among Black and Hispanic adults than White adults.

Use of cryptocurrency for financial transactions was more common among the unbanked as well as those who used nonbank check cashing and money orders. Four percent of unbanked adults used cryptocurrency for financial transactions, compared with 2 percent among banked adults. Regardless of bank account ownership, those who used nonbank check cashing or money orders had a greater propensity to use cryptocurrency for transactions—5 percent among those who used nonbank check cashing or money orders compared with 1 percent among those who did not. That said, use of cryptocurrency for financial transactions remained very low, even among groups who were more likely to use cryptocurrency in this way.

Credit Outcomes and Perceptions

Thirty-six percent of adults applied for any type of credit in 2023, unchanged in recent years, yet down from 41 percent in 2019, before the pandemic. Among those who applied, just under one-third were either denied credit or approved for less credit than they requested, up 2 percentage points from 2022 and up 5 percentage points from 2021.

Despite the higher denial rates, consumer confidence about credit card applications remained unchanged from 2022. Sixty-three percent of adults were "very confident" that their application would be approved if they applied for a credit card, the same as in 2022. Similarly, the share of adults "not confident" that their application would be approved held steady at 14 percent.

Lower-income adults were far more likely to be denied credit or approved for less than requested. Fifty-three percent of credit applicants with income below $50,000 experienced such actions, compared with 16 percent of those with income above $100,000.

Denial rates also differed by race and ethnicity, with Black and Hispanic applicants being particularly likely to report a denial or an approval for less credit than requested. Moreover, Black and Hispanic adults saw higher denial rates regardless of income level (figure 23).

Credit Cards

People use credit cards in different ways. Some use credit cards primarily to make payments, paying off their balances in full each month and avoiding interest charges. Others carry a balance and incur borrowing costs.

Eighty-two percent of adults had a credit card in 2023.³⁸ They were nearly evenly split between the people who paid off their balances in each of the previous 12 months and people who carried balances from month to month at least once in the prior year. Just about one-quarter said they carried a balance most of the time during the prior 12 months.

Almost all adults with an income of at least $100,000 had a credit card. At lower income levels, having a credit card was less common, though adults at these income levels who did have credit cards were more likely to use them to carry balances from month to month. Consequently, middle-income adults were the most likely to have a credit card that they used to finance purchases by carrying balances from one month to the next (table 24).

Table 24. Credit card access and usage (by demographic characteristics)

Credit card usage also differed by race and ethnicity, age, and disability status. Ninety percent of Asian adults had a credit card, followed by 86 percent of White adults, 74 percent of Hispanic adults, and 70 percent of Black adults. While credit card ownership was lower among Black and Hispanic adults, those who did have a credit card were more likely to carry a balance. Young adults and those with a disability were also less likely to have a credit card than were older adults or those without a disability.

Buy Now, Pay Later

BNPL provides consumers the option to pay for a purchase with a small number of equal payments (usually four), often without being charged interest. For example, someone purchasing a $100 item may be able to make one payment of $25 at the time of purchase, then make three additional monthly payments of $25.

Fourteen percent of people used BNPL in the prior 12 months, up 2 percentage points from 2022.

The top two reasons for using BNPL were wanting to spread out payments (87 percent) and convenience (82 percent) (figure 24). Notably, over half (55 percent) of those who used BNPL—and an even higher 69 percent of those with incomes less than $50,000 who used BNPL—said they used BNPL because it was the only way they could afford a purchase.

Use of BNPL was more common among low- and middle-income adults, Black and Hispanic adults, and women (table 25). Differences by race and ethnicity were large, with Black and Hispanic adults about twice as likely to use BNPL as White or Asian adults. Additionally, sizeable differences remain even after controlling for other factors like income, age, and self-perceived credit rating.

Table 25. Buy Now, Pay Later (BNPL) use (by demographic characteristics)

People also differed in their use of BNPL according to their self-reported credit rating (figure 25). Those who rated their credit as "poor" and "fair" were the most likely to use BNPL, followed by those rating their credit as "very poor." Moreover, among those who used BNPL, adults with lower self-reported credit ratings were also more likely to cite "only way I could afford it" or "only accepted payment method I had" as reasons for using BNPL than adults who rated their credit higher.

Most people who used BNPL made their payments on time. Overall, 18 percent of people who used BNPL in the prior 12 months were late making a payment, up 1 percentage point from 2022. However, late payments were more common among those with lower income, Hispanic adults, and younger adults (table 25). Nearly 6 in 10 of those late making a payment (11 percent of those who used BNPL) said they were charged extra for being late.

Nonbank Small Dollar Credit

Consumers with negative credit histories, or no credit history, sometimes use nonbank credit products like payday or pawn loans when a small dollar credit need arises. These products typically have high borrowing costs.

In 2023, 6 percent of adults used a payday, pawn, auto title, or tax refund anticipation loan, up 1 percentage point from 2022. While overall use tends to be small, use is more likely among adults with lower income, Black and Hispanic adults, and adults with a disability (table 26). Notably, differences by race, ethnicity, and disability status were present even after controlling for other factors like income an age.

Table 26. Use of payday, pawn, auto title, and refund anticipation loans (by demographic characteristics)

Similar to those who used BNPL, adults with lower self-reported credit ratings were more likely to use one of these products (figure 26). Just above one-fourth of those rating their credit as "poor" did so, compared with only 1 percent of those rating their credit as "excellent." Unlike BNPL, however, use of these products was much higher among those who did not have a credit card (13 percent) than among those who did (4 percent).

 

References

 35. Cryptocurrencies are decentralized digital assets that have a distributed ledger and can be used for peer-to-peer payments. For additional information on cryptocurrencies, see Board of Governors of the Federal Reserve System, Money and Payments: The U.S. Dollar in the Age of Digital Transformation (Washington: Board of Governors, January 2022), https://www.federalreserve.gov/publications/money-and-payments-discussion-paper.htm. Return to text

 36. Because the survey is conducted online, the sample population may be more technologically connected than the overall population, which could increase the share of adults reporting use of emerging technologies such as cryptocurrencies. Return to text

 37. Data from both the 2022 and 2023 SHED are used here because of the small number of people who used cryptocurrency for this purpose in each individual year. Return to text

 38. This share is higher than the 72 percent of households with a credit card in the Federal Deposit Insurance Corporation (FDIC) 2021 FDIC National Survey of Unbanked and Underbanked Households (Washington: FDIC, October 2022), https://www.fdic.gov/analysis/household-survey/2021report.pdf. Return to text