A banking desert is an area where people don’t have access to a local bank branch. For some, the nearest option may be more than 10 miles away, making everyday banking a challenge.
This matters because when banks are out of reach, people often turn to check-cashing stores, payday lenders, or prepaid cards that charge high fees. The lack of affordable banking options can make it harder to save money, get loans, or build a credit score.
In this article, we’ll explain what banking deserts are, why they exist, and the alternatives you can use if you live in one.
What Is a Banking Desert?
A banking desert is a community where traditional bank branches are not accessible within a reasonable distance. Experts often define this as 10 miles or more from the nearest branch.
Millions of Americans live in these areas. The Federal Reserve estimates that thousands of communities across the United States qualify as banking deserts.
The people most affected include rural communities, low-income neighborhoods, and minority populations. These groups often face the toughest barriers when trying to access affordable financial services.
Why Banking Deserts Exist
Banking deserts didn’t happen overnight. They are the result of long-term trends in the financial industry.
- Branch closures: Many banks have shut down locations in small towns and lower-income neighborhoods to cut costs.
- Profitability challenges: Serving rural areas often brings lower deposit levels and fewer lending opportunities, making branches less profitable.
- Regulatory and economic factors: Shifts in regulation and the rise of digital banking have pushed traditional banks to reduce their physical presence.
The Impact of Living in a Banking Desert
Living in a banking desert can make simple financial tasks more expensive and complicated. Without easy access to a local bank branch, many people rely on services that cost more but provide fewer long-term benefits.
- Reliance on alternative services: Check-cashing stores, payday lenders, and money orders often fill the gap but come with high fees.
- Higher costs: Fees for these services add up quickly and take money away from savings.
- Limited credit access: Without a bank, it’s harder to get loans or credit cards with fair terms.
- Barriers to building a credit score: Using cash-only services does not help establish or improve a credit score.
Comparison Table: Costs of Banking Alternatives in Deserts
| Service Type | Typical Fees/Interest | Convenience | Builds Credit? |
|---|---|---|---|
| Check-cashing store | 1%–10% per check | High | No |
| Payday loans | 300%–500% APR | High | No |
| Prepaid debit cards | $5–$15 monthly | Moderate | No |
| Online bank account | Often free | High | Yes (if credit-based) |
How to Bank if You Live in a Banking Desert
The good news is that even if you don’t have a branch nearby, there are safe and affordable ways to handle your money. Each option comes with its own benefits, so the right choice depends on your needs.
Online-Only Banks
Online banks are built for people who don’t need a physical branch. They often offer lower fees and access to large ATM networks.
- No branch needed: You can open and manage accounts entirely online.
- Lower fees: Most online banks eliminate monthly service charges.
- Key features: Look for FDIC insurance, mobile check deposit, and access to fee-free ATMs.
See also: Easiest Bank Accounts to Open Online in 2025
Comparison Table: Popular Online Banks for People in Banking Deserts
| Bank/Fintech | Monthly Fees | ATM Access | Mobile App Rating | Best For |
|---|---|---|---|---|
| SoFi | $0 | 55,000+ | High | Full-service digital banking |
| Current | $0 | 40,000+ | High | Fast access to paychecks |
| Chime | $0 | 60,000+ | High | Everyday banking |
| Ally Bank | $0 | 75,000+ | High | Savings + checking |
| Varo | $0 | 55,000+ | High | Early direct deposit |
Credit Unions
Credit unions often serve local communities and give members access to shared branch networks and surcharge-free ATMs. They usually charge fewer fees than traditional banks and may provide more flexible loan options.
Community Development Financial Institutions (CDFIs)
CDFIs are mission-driven organizations that focus on helping underserved areas. They often provide access to small loans, credit-building products, and financial education programs.
Retail and Prepaid Options
Prepaid debit cards are sold at retailers like Walmart, Walgreens, and CVS. They can help with direct deposit and purchases, but fees can be higher compared to online banks. They also don’t help with building a credit score.
Neobanks and Fintech Apps
Apps like Cash App, PayPal, and Venmo can act as limited banking alternatives. They’re useful for sending money and making payments but don’t replace a full banking relationship. They may lack features like FDIC insurance or access to credit products.
How to Choose the Best Alternative for You
Choosing the right banking option depends on your personal needs and habits. Start by thinking about what matters most—whether that’s ATM access, low fees, or features that help build a credit score.
- ATM access: Check whether the account includes fee-free ATMs near where you live or travel.
- Direct deposit: Make sure your bank or app supports quick and reliable direct deposit.
- Credit-building features: Look for options that help improve your credit score over time.
- Savings features: Compare interest rates and tools that make saving money easier.
- Safety check: Always confirm FDIC or NCUA insurance for your deposits.
- Avoid high-fee traps: Steer clear of payday loans and prepaid cards with monthly charges.
Government and Policy Efforts to Address Banking Deserts
Several proposals aim to reduce the number of communities cut off from traditional banks. These efforts focus on giving people more affordable and fair options.
- USPS banking proposals: Some policymakers suggest expanding postal services to include basic banking.
- Community Reinvestment Act programs: The CRA encourages banks to invest in underserved communities.
- Local and state initiatives: Certain areas offer partnerships with credit unions and CDFIs to expand access.
Final Thoughts
Living in a banking desert can make managing money more expensive and stressful, but you still have options. Online banks, credit unions, and CDFIs are filling the gap left by branch closures.
The best choice depends on your needs, but the goal is the same: secure your money, avoid unnecessary fees, and find services that help you grow financially. With the right account, you can build stability and even strengthen your credit score without relying on a traditional branch.
