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Who is unbanked or underbanked?
The terms describe different situations. An unbanked household has no bank or credit-union account. An underbanked household has an account but, under the FDIC’s survey definition, also used at least one specified nonbank transaction or credit service during the previous 12 months. Underbanked does not simply mean having an account but disliking it.
In the FDIC’s 2023 U.S. household survey, 4.2% of households—5.6 million—were unbanked, while 14.2%—19.0 million—were underbanked. These are household measures from the 2023 survey, reported by the FDIC in 2024; they are not estimates of individual adults or measurements for 2026. FDIC: 2023 National Survey of Unbanked and Underbanked Households; FDIC, November 12, 2024.
How can cashless payments create a barrier?
A cash-only household may not be able to complete a transaction
In 2023, 66.2% of unbanked households relied entirely on cash, according to the FDIC. If a store, biller, or service accepts only electronic payment, a household that has no usable electronic payment channel may not be able to complete the transaction. It may need an intermediary or a way to convert cash into a payment form the recipient accepts.
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The FDIC has warned that “the cash-only unbanked may find it increasingly difficult to participate in the formal economy as the U.S. financial system evolves toward a more digital infrastructure.” The statement appears in the agency’s analysis of cash-only households and those using prepaid cards or nonbank payment apps, based on its 2021 survey. FDIC: A Closer Look at the Unbanked.
Digital alternatives can require an extra step
Someone who receives or holds money as cash may have to use a prepaid card, a payment app, or another person or service to make an electronic payment. The FDIC documents unbanked households’ use of cash, money orders, check cashing, prepaid cards, and payment apps. If a payer or biller requires a digital channel, the household may face a mismatch between the required payment method and the one it can readily use.
Those alternatives do not work for everyone. In the FDIC’s 2023 survey, 33.8% of unbanked households used a combination of prepaid cards or nonbank online payment services to conduct transactions, while 66.2% relied entirely on cash. The percentages describe different approaches among unbanked households in that survey year.
Handling cash has its own risks
The FDIC notes that cash-only households rely on in-person cash transactions and can face theft or loss while handling money for everyday needs. Moving to electronic payments would not automatically eliminate risk: the cited FDIC material does not assess account access problems, payment errors, fraud, or service outages.
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How the impact differs by household
| Household type | Account status | Payment access and cash reliance |
|---|---|---|
| Cash-only unbanked | No bank or credit-union account | Relies entirely on cash; may need an intermediary or another means of converting cash to pay where cash is not accepted. |
| Unbanked using prepaid cards or nonbank payment apps | No bank or credit-union account | Uses one or more nonbank tools for some transactions; access to electronic payments depends on the services used and the recipient’s accepted methods. |
| Underbanked account holder | Has an account, and used at least one specified nonbank transaction or credit service in the prior 12 months under the FDIC definition | May have access to account-based payments as well as nonbank services; the label alone does not show how dependent the household is on cash. |
These categories distinguish account ownership from payment habits. They do not establish that every person in one group has the same access or faces the same degree of difficulty.
Underbanked does not mean disconnected from digital banking
The FDIC reports that mobile banking was more common as a primary account access method among underbanked than fully banked households in 2023, while online banking was less common. Across all banked households, 48.3% used mobile banking as their primary account access method that year. These findings show varied ways of accessing accounts; they do not mean that every underbanked person is online, nor do they establish that digital access resolves the barriers faced by cash-only households. FDIC: 2023 National Survey of Unbanked and Underbanked Households.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Why the risk may fall unevenly
In its survey findings, the FDIC reports that lower-income, less-educated, Black, Hispanic, disabled, and single-parent households were more likely to be unbanked. These are group-level patterns, not evidence that an individual’s identity causes their banking status or predicts their payment options.
The FDIC also found that cash-only unbanked households appeared more disconnected from mainstream banking and were more likely than other unbanked households to cite distrust of banks as a main reason for not having an account. Opening an account should not be treated as a simple or universally suitable solution to a cash-acceptance barrier.
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What the available evidence can—and cannot—show
The FDIC’s surveys establish that cash reliance is substantial among unbanked households and that some households use nonbank digital alternatives. They support a clear conditional risk: where cash is refused, a person who depends on it needs another workable way to pay.
They do not establish the share of U.S. merchants that refuse cash, the number of purchases denied, or the added travel, conversion costs, or total economic harm caused by cashless-only policies. The cited evidence is U.S.-specific, and household survey findings do not prove that cashless policies caused differences in banking status or demographic patterns.
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