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Board of Governors of the Federal Reserve System

By Maude Toussaint-comeau, Jeanne M. Hogarth and William H. Greene


we explore transaction account ownership and the use of currency exchange (check-cashing) businesses for financial and nonfinancial services. The results from the estimated model suggest that being unbanked is jointly determined with obtaining financial services from a currency exchange. Our findings show that in the Chicago metropolitan area, currency exchanges play an active role in providing financial services to unbanked households, especially residents of low- and moderate-income (LMI) neighborhoods and Black and Hispanic households. Specifically, we find that unbanked households are 14.6 percentage points more likely than their banked counterparts to patronize a currency exchange. Unbanked households residing in an LMI community are 7.6 percentage points more likely to use a currency exchange than unbanked households residing elsewhere. Furthermore, we find that perceived unfavorable checking account characteristics and distaste for a checking account are important influences on the probability that an unbanked Black household obtains financial services from a currency exchange. Unbanked Hispanic households that obtain financial services from currency exchanges also are influenced by perceived The views expressed are the authors ’ and do not necessarily reflect the views of the Federa

Year: 2011
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