Beyond Race and Gender: Financial Access to Low and Moderate Income Households

Checking accounts with an overdraft protection line of credit can be seen as the first steps in accessing credit for some households, specifically for Low- to Moderate-Income (LMI) borrowers. In this paper, we assess a lender’s decision to grant LMI consumers an overdraft protection line of credit for their checking account, and the extent to which LMI borrowers bounce their checks once approved for an overdraft protection. Based on a sample of over 19,000 households, we find that banks are more likely to deny credit to their current LMI customers, controlling for an individual's income and credit risk characteristics. Low and moderate income customers also receive about $1100-$1500 lower overdraft line of credit. However, based on their ex post performance, they are not significantly more likely to bounce a check than higher income households.