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States and Metro Areas With the Most Unbanked Households
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States as well as Metro Areas With the Most Unbanked Households
By Laura McMullen Assistant Assigning Editor Financial, personal finance and news Laura McMullen assigns and edits the financial news content. Laura was previously the senior writer at NerdWallet and covered saving, making and budgeting money; she also contributed to the «Millennial Money» column in The Associated Press. Before making the move to NerdWallet at the end of 2015 Laura worked for U.S. News & World Report, where she wrote and edited content related to health, careers and education as well as contributed to the rankings of the company. Before working at U.S. News & World Report, Laura interned at Vice Media and studied journalism as well as the history of Arabic in the Ohio University. Ohio University. Laura currently lives in Washington, D.C.
Sep 28, 2016
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The perks at your bank aren’t limited to free coffee and candy -they offer services you might take for granted for example, cashing checks for free and loans that offer reasonable rates of interest. However, for the more than 9.5 million unbanked households within the U.S., these services are expensive which NerdWallet discovered can add hundreds of dollars a year.
Within the U.S., 7.7% of households didn’t have any members with a bank account, in the latest FDIC Nationwide Survey of Bankrupt and Underbanked Households, the most current set of information available. That was down from the 2011 edition of the FDIC’s Federal Deposit Insurance Corp.’s biannual survey, and the number fell to 7% in 2015, as per an early preview of the new editionthat will be published in October.
Missed benefits, added fees
While fewer families are avoiding financial institutions, those who do are missing out on the opportunity to build emergency funds, and secured credit cards that aid in building credit. They’re not able to take advantage of the full array of fraud protections offered by federally insured banks and credit unions offer, and they can’t access online or mobile banking tools that can save them the time as well as money. (Read NerdWallet’s coverage of the nation on the to learn more about alternatives for non-banked customers, such as .)
Households that don’t have accounts with banks also have to pay a lot of fees to financial-service providers that are expensive alternatives. NerdWallet calculated the costs of money orders, check cashing and debit cards that are prepaid. Households that are not banked and use the prepaid debit card which allows direct deposit can pay an average annual amount of $196.50 in fees, while those who are not banked and utilize a prepaid debit card that does not allow direct deposit pay an average annual amount of $488.89 in charges. (See our complete methodology for more details.)
Unbanked households in the metropolitan and state
We examined the $196.50 as well as the $488.89 figures as percentages of each state’s average 2013 income for households that don’t have a bank account, based on FDIC data. Look at on the below map, to discover the states where unbanked households are hit the hardest by the cost of fees, using both the higher ($488.89) as well as the less ($196.50) figures. You can also see what states are home to the largest proportion of households with no bank account.
The tables below show the percentage of households without a bank account in 22 metropolitan areas , and across all states and Washington, D.C. We determined that the price of not owning accounts with banks by dividing it into the household income of households that are not banked within the metro area, according to the FDIC. We excluded three major metro areas for which some data were unavailable: San Diego-Carlsbad-San Marcos, California; Sacramento-Arden-Arcade-Roseville, California; and San Antonio, Texas.
Metro area has a large number of households that are unbanked.
UNBANKED HOMEHOLDS BY STATE
Rank (most to least unbanked)
State
The percentage of households that are unbanked
Average unbanked household income
Total unbanked costs of all household households (lower estimate)
Total unbanked expenses of all household households (higher estimate)
Average unbanked costs as percent of income (using higher estimate)
1
Mississippi
14.5%
$15,394.41
$31.08 million
$79.82 million
3.18%
2
Louisiana
13.9%
$20,104.15
$47.26 million
$121.37 million
2.43%
3
Arizona
12.8%
$20,300.92
$61.95 million
$159.07 million
2.41%
4
Arkansas
12.3%
$15,653.75
$29.08 million
$74.68 million
3.12%
5
District of Columbia
11.8%
$14,588.29
$7.46 million
$19.15 million
3.35%
6
West Virginia
11.0%
$18,592.82
$16.56 million
$42.54 million
2.63%
7
New Mexico
10.9%
$18,934.67
$17.78 million
$45.67 million
2.58%
7
Georgia
10.9%
$18,957.70
$81.64 million
$209.64 million
2.58%
7
Oklahoma
10.9%
$19,373.49
$32.56 million
$83.61 million
2.52%
10
South Carolina
10.5%
$19,724.50
$38.88 million
$99.84 million
2.48%
11
Texas
10.4%
$20,621.80
$191.63 million
$492.07 million
2.37%
12
Kentucky
9.7%
$15,417.32
$34.05 million
$87.45 million
3.17%
12
Tennessee
9.7%
$17,204.81
$48.51 million
$124.58 million
2.84%
14
Alabama
9.2%
$18,787.70
$36.03 million
$92.52 million
2.60%
15
Missouri
8.9%
$20,058.95
$42.11 million
$108.12 million
2.44%
16
New York
8.5%
$16,833.40
$125.19 million
$321.47 million
2.90%
17
North Carolina
8.4%
$17,177.65
$61.46 million
$157.82 million
2.85%
18
New Jersey
8.2%
$21,298.78
$51.25 million
$131.61 million
2.30%
19
California
8.0%
$22,211.31
$206.18 million
$529.45 million
2.20%
20
Nevada
7.9%
$19,047.68
$17.06 million
$43.80 million
2.57%
21
Illinois
7.4%
$21,036.78
$71.47 million
$183.53 million
2.32%
22
Ohio
7.2%
$18,777.16
$65.61 million
$168.47 million
2.60%
22
Indiana
7.2%
$22,675.18
$36.28 million
$93.17 million
2.16%
24
Montana
6.6%
$11,963.24
$5.35 million
$13.74 million
4.09%
25
Virginia
6.5%
$19,340.75
$39.67 million
$101.88 million
2.53%
26
Colorado
6.4%
$22,159.12
$25.84 million
$66.36 million
2.21%
27
Rhode Island
6.2%
$18,543.22
$5.12 million
$13.15 million
2.64%
27
Florida
6.2%
$19,376.05
$95.70 million
$245.73 million
2.52%
29
Delaware
6.1%
$22,921.16
$4.33 million
$11.12 million
2.13%
30
Kansas
6.0%
$21,820.97
$13.49 million
$34.64 million
2.24%
31
Massachusetts
5.8%
$22,086.69
$29.38 million
$75.45 million
2.21%
32
Nebraska
5.7%
$15,622.98
$8.47 million
$21.76 million
3.13%
32
Michigan
5.7%
$19,127.41
$42.44 million
$108.99 million
2.56%
34
Connecticut
5.6%
$21,036.57
$15.37 million
$39.48 million
2.32%
34
Wyoming
5.6%
$24,067.11
$2.65 million
$6.82 million
2.03%
36
Idaho
5.4%
$17,444.44
$6.39 million
$16.42 million
2.80%
37
Pennsylvania
5.2%
$17,820.47
$52.14 million
$133.90 million
2.74%
38
Wisconsin
4.8%
$16,495.70
$21.75 million
$55.85 million
2.96%
38
Maryland
4.8%
$24,470.06
$20.81 million
$53.43 million
2.00%
40
Oregon
4.5%
$16,345.12
$13.62 million
$34.98 million
2.99%
40
Iowa
4.5%
$18,571.62
$10.83 million
$27.81 million
2.63%
42
South Dakota
4.2%
$16,040.68
$2.67 million
$6.86 million
3.05%
43
Washington
4.1%
$17,048.35
$21.07 million
$54.10 million
2.87%
44
Hawaii
3.8%
$21,096.90
$3.41 million
$8.77 million
2.32%
45
Minnesota
3.6%
$16,228.27
$14.92 million
$38.31 million
3.01%
46
Utah
3.3%
$21,617.24
$6.11 million
$15.68 million
2.26%
47
Vermont
3.1%
$22,553.77
$1.59 million
$4.08 million
2.17%
48
New Hampshire
2.9%
$26,653.71
$3.00 million
$7.71 million
1.83%
49
North Dakota
2.8%
$22,645.30
$1.58 million
$4.06 million
2.16%
50
Maine
2.4%
$14,906.68
$2.57 million
$6.59 million
3.28%
51
Alaska
1.9%
$21,299.66
$1,002,022.57
$2,573,028.07
2.30%
Important takeaways
1. The proportion of households that are not banked is particularly high among low-income households: Nationally, 7.7% of households didn’t have a bank account in 2013, however, the rate was much more so for low-income households. Nearly 20% of households with incomes of less than $30,000 were unbanked and 24% of them were unbanked, meaning they had more than one saving account account or but had used at least one alternative financial service during the previous year. These types of services include check cashing or money orders, as well as payday loans. More than three-quarters (35.6 percent) of households that were not banked for the FDIC report said the main reason for not having an account is that they didn’t have enough funds to maintain an account, or to maintain the required minimum balance. (Note that many don’t require minimum balances.) Some of the most common reasons are the distrust or dislike of banks and high or unpredictable fees for accounts.
The national correlation between unbanked and low-income households translates to the state level. Seven of the 10 states with the highest percentages of unbanked people are among the states with low median incomes for households in the latest U.S. Census American Community Survey. Except for Washington, D.C., the nine states with the highest percentage of households that were not banked were home to households with incomes that were lower than the 2013 U.S. median of $52,250.
2. The cost of not having a bank account have the greatest impact on households with lower incomes as income among households who don’t have a bank account is particularly poor. The average income after tax of non-banked households in the U.S. was $17,359, and the lowest was in Montana at $11,963.
Be aware that households without bank accounts that utilize a prepaid debit card that does not direct deposit, are charged on average $488.89 in fees annually. In Montana, that would consume up to 4 percent of an typical household’s income that is unbanked. For context, the average U.S. household spent about 3.5 percent of their post-tax earnings on gasoline and motor oil in the year 2015, as per the U.S. Bureau of Labor Statistics.
For Washington, D.C., the gap in income between unbanked and banked households is staggering. The average 2013 income for households that had a bank account D.C. was $55,032, but that was only $14,588 for those without an account with a bank. The latter figure doesn’t be much more than a few dollars in a city in which housing options for low-income households are shrinking. According to an D.C. Fiscal Policy report, in 2013, there were only half the number of Washington apartments renting under $800 a month than they had in 2002. The report concludes that «subsidized housing is now virtually the only source for affordable housing.»
3. Local unbanked demographics reflect national trends: According the FDIC 1/5th of households with black names (20.5 percent) in the U.S. in 2013 were not banked, followed by Hispanic (17.9 percent) along with American Indian/Alaskan families (16.9%). Only 2.2 percent of Asian households had no bank accounts, which was a lower percentage than white (3.6%) and Pacific Islander/Hawaiian (6.1 percentage) households.
Many of the places with the highest concentration of households without bank accounts mirror these national demographics. In No. twelve Tennessee as well as No. 2 Louisiana, each state’s biggest city has a majority of black residents in both cities, with Memphis at 63% while New Orleans at 59.8%. Phoenix, which tops our list of unbanked metros with a significant Hispanic community, as does Albuquerque which is the largest city in New Mexico, which tied for seventh among the states. Two states with the highest percentages of populations that aren’t banked, New Mexico and Oklahoma are home to American Indian populations nearly 10 times higher than those in the U.S. as a whole.
4. Limited access to in-person and online banking is a problem: It’s hard to get a bank account opened if there are no branches where you reside. More than half the ZIP code in the middle of South are «bank deserts,» meaning they have only one or no bank branches, according to the MS-based Hope Policy Institute, which studies financial inclusion. In the institute’s analysis, the mid-South comprises Mississippi, Louisiana and Arkansas and has one of the highest percentages of unbanked households. The region also includes the western region of Tennessee which is home to Memphis in which nearly one-fifth (19.5%) of households don’t have accounts with banks.
Brick-and-mortar stores are especially important for consumers who can’t connect to financial institutions online. Some Memphis residents face hurdles to both of these methods. Based on the U.S. Census Bureau’s 2013 American Community Survey, 27.7 percent of Memphis households were without an internet connection, as compared with 21.4 percent nationwide. The number of people without internet access is high in New Orleans, too, at 27.4 percent.
Sreekar Jasthi is a data analyst at NerdWallet which is a personal finance website. Email: . Laura McMullen is a staff writer at NerdWallet. Email: . Twitter: .
Methodology
Concentrations of income and unbanked households
To calculate the average income for unbanked households nationwide and across all states we used data from the . To decide which metropolitan regions to study, we first chose those 25 from the FDIC report with the most households. We omitted San Diego-Carlsbad-San Marcos, California; Sacramento-Arden-Arcade-Roseville, California; and San Antonio, Texas, because of insufficient income data.
The percentages of households with no bank accounts across each state or metropolitan region are also taken from the FDIC report.
Fees associated with being unbanked
We arrived at the range of $196.50 between $196.50 and $488.89 in charges for an average household without a bank account by adding the fees that are associated with cash checks, money orders and debit cards that are prepaid. The cost of these fees is contingent on whether the prepaid debit cards allow direct deposit.
To calculate the cost of check cashing for non-banked households with debit cards prepaid without direct deposit, and for households using only cash we assumed two pay checks that were cashed each month, and a fee of 1% of the check’s total value. For households using debit cards that are prepaid and have direct deposit we added no cash for checks. For both households we assumed one cash purchase per month and an average charge of $1.40.
To calculate the average check cashing and money order fees, we used FDIC’s statistics on how often alternative financing services used by each kind of household (banked or not) Then we added the less frequent use by households that are banked to the average cost.
To calculate the average annual cost of debit cards with prepaid options We evaluated 69 cards that were based on major issuers, search volume as well as Pew Charitable Trust’s the cards listed on the websites of’s and. For cards with different plans, we counted each plan as a separate card.
The study includes the annual costs of a prepaid debit card with and without direct deposit for payroll. The median monthly fee was $4.98, and the median out-of-network ATM fee was $2.50. We used the maximum cash loading fee of $4.95.
Without direct deposit, we had 12 monthly charges as well as four ATM fees per month and 2 cash load fees each month. PIN- and signature-based purchase transaction fees aren’t usually applicable to cards with monthly charges, so we excluded them.
Upcoming FDIC survey
A preview of the 2015 FDIC National Survey of Unbanked as well as Underbanked Households, which is scheduled for release in all its entirety on October. 20th, 2016, showed that the rate of unbanked households has fallen to 7%, or about 8.6 million households. NerdWallet’s analysis is based upon the most recent full set of information available.
About the author: Laura McMullen writes about managing money for NerdWallet. Her writing has been featured in The Associated Press, The New York Times, The Washington Post as well as other outlets.
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