Definition
Underbanked describes people who have a bank account but still rely heavily on alternative financial services—such as payday loans, check cashing, or money orders—often due to fees, credit constraints, or limited access.
Why It Matters
It signals gaps in financial access and can lead to higher costs and greater financial vulnerability even among banked households.
Example
Someone has a checking account but uses payday loans and prepaid cards for short-term needs.