Bank on a better future

St. Petersburg Mayor Rick Baker and City Council member Karl Nurse have a capital idea: establish a program that teaches low-income residents financial literacy while helping them open bank accounts. St. Petersburg has more than 18,000 low-income residents who do not have checking accounts, which forces them to use alternative financial services and predatory lenders. The new effort, called Bank on St. Petersburg, has the potential to bring many city residents into the financial mainstream, saving them money and providing them tools to reduce debt and increase savings.

Nurse and Baker envision a joint effort among the city, financial institutions, community nonprofit organizations and financial regulators. The city would market the program and provide education to residents about the benefits of properly managing money. Banks would allow low-income residents to open low-cost or no-cost checking accounts.

Not having a checking account is expensive. A Pew Research Center survey shows residents without one might spend between 5 percent and 7 percent of their income on fees and expenses. The research further indicates that among households lacking a checking account, 52 percent include at least one full-time worker who uses a nonbank check casher at an average cost of $40 per payroll check. Nurse and Baker want to end this problem by giving residents a way to build relationships with banks. In the long term, residents can establish a positive financial history, save for the future and gain access to credit.

The plan, based on a successful program in San Francisco, will only work if local banks cooperate. Nurse and Baker are scheduled to meet with them next month. Bank on St. Petersburg could greatly benefit low-income residents, potentially raising their standard of living by as much as 5 percent. In turn, the entire community would benefit.