What does "underbanked" mean in FDIC reports?

Prepare for the FDIC Technical Evaluation Test with engaging questions and comprehensive explanations. Enhance your knowledge and boost your confidence for the exam!

The term "underbanked" in FDIC reports refers to individuals or households that have limited access to traditional banking services, which is accurately captured by the correct answer. This category includes people who may have bank accounts but also rely on alternative financial services for their banking needs, such as payday loans or check-cashing services.

This can arise from various reasons, including geographic obstacles, lack of sufficient funds to maintain a bank account, or distrust of formal banking institutions. The FDIC monitors the underbanked population to understand their financial behaviors and needs to improve access to banking services, which is crucial for promoting financial inclusion.

In contrast, the other options do not accurately represent the meaning of "underbanked." Some individuals may have no banking access at all, which defines the "unbanked" population, while those relying exclusively on credit cards do not capture the broader scope of limited banking service access. Lastly, frequently switching banks is not a defining characteristic of being underbanked; rather, it relates to customer behavior regarding banking preferences.

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