Teaching financial basics and outreach efforts help S.C. banks tap into

One by one children at Cayce's Pineview Elementary School lined up the other morning to make a bank deposit.

Some brought quarters and $1 bills, others just pennies.

But it didn't matter how much to Kristen Rosada of Security Federal Bank. She said the bank rewards children for the number of deposits they make, not the total amount saved.

The Aiken-based bank's savings program is just one of several around the state aimed at teaching South Carolinians the basics of banking and attracting new customers.

But bankers face a step challenge.

A federal study released this month shows more than a third of S.C. households are "unbanked," meaning they don't have accounts, or they are "underbanked," meaning they may have an account but use other financial services.

The reasons vary why 614,000 S.C. households have little use for banks.

Some observers say it's cultural, noting that Southerners dating back to Thomas Jefferson, don't trust banks. Others say many South Carolinians are poor, struggle to build solid credit histories, or live in rural areas where there are no banks.

People who don't have bank accounts might use more expensive financial services, such as paying bills with money orders or borrowing from pay-day lenders.

Most everyone, though, agrees a bank account is necessary for people to have some financial independence.

With an account, people can cash or deposit checks, and save for emergencies, college tuition and even retirement.

The study by the Federal Deposit Insurance Corp., the U.S. government agency that insures individual accounts, was the first of its kind. Bankers hope to use it as a road map to reach those who are unbanked or underbanked, said Martin J. Gruenberg, vice chairman of the FDIC.

"It breaks new ground in the effort to expand access to basic financial services," Gruenberg said.


But some banks already are trying to reach out to the households without accounts.

One example is Florence-based First Reliance Bank's Check 'N Save program, which was launched in June.

The bank, which has branches in the Midlands, gives $10 toward a certificate of deposit that a customer opens. Customers are required to set up automatic transfers of at least $5 a month that goes to the CD account.

The program is designed to help customers learn to manage a checking account and save, said Rick Saunders, First Reliance's CEO.

A key selling point is showing potential customers how much they can save in check-cashing fees if they open an account, Saunders added.

According to First Reliance's calculations, a person who cashes a $500 paycheck every two weeks would spend $455 a year in fees. The fees are based on a charge of 3.5 percent for each $500 check cashed.

Instead of paying check-cashing fees, that money could go into the CD account, the bank said.

Saunders conceded there are risks for the bank because some people who fall into the unbanked or underbanked category have a limited credit history or challenged credit. Still, he said, those potential customers offer the bank an opportunity to grow.

"What we find, regardless of a person's financial history, most people want to get better," Saunders said.


Where a bank office is located also influences who has accounts. In most rural areas of South Carolina, which tend to be poor, there are few banks.

"In these areas, the people don't have the income to do business with banks," said Democratic state Rep. Joe Neal, who represents a largely rural area in Lower Richland and Sumter County.

Yet, there are people - particularly the elderly - who would use banks if one was near, added Neal, who's also co-chairman of the S.C. Progress Network, a coalition of groups that promote social and economic justice.

"They pay their bills at the post office with money orders," Neal said.

Transportation is another issue, Neal said. Some people don't own a car or have a way to get to a bank, Neal said.

For the bank, executives must determine if there are enough customers - residential and commercial - in the area to support a branch office, said Lloyd Hendricks, president and CEO of the S.C. Bankers Association. Construction costs can be steep, too - with land and building costs reaching up to $2.5 million, he said.


Education of the S.C. consumer may be the best hope, bankers said.

Many banks, like Security Federal, send employees into the schools to teach children, the basics of checking and saving accounts.

Other banks have bused people to finance fairs where they learn how to build good credit, manage checking and savings accounts, and stick to a budget, Hendricks said.

Bankers even visit churches, talking to congregations about the basics of financial management.

The children at Pineview Elementary participate in a program called "Looney Tunes," which has been around for nearly 20 years, said Andrea Haltiwanger, Security Federal marketing director.

Bank staffers go the program's 22 participating schools once a week to collect deposits, Haltiwanger said.

The children seem to be aware of how important it is for people to know how to manage their finances, Haltiwanger added.

"They'll say, oh yeah, 'I know what foreclosure means or what's a bankruptcy,' " Haltiwanger said. "They know because they've been through it."

S.C. bankers' efforts have garnered national attention. The state organization's Young Bankers Division has won the American Bankers Association award for its education efforts seven out of the last eight years.

"I think the key to this is education," Hendricks said. "We've made it a priority."