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States as well as Metro Areas With the Most Unbanked Households
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States as well as Metro Areas With the Most Unbanked Households
The author is Laura McMullen Assistant Assigning Editor Personal finance, financial and news Laura McMullen assigns and edits financial news content. Her previous position was as a top journalist at NerdWallet and was responsible for saving, making and budgeting money. She has also written for the «Millennial Financial» column for The Associated Press. Prior to becoming a part of NerdWallet in 2015, Laura worked for U.S. News & World Report which is where she edited and wrote content related to health, careers and education and also contributed to the company’s ranking projects. Before joining U.S. News & World Report, Laura interned at Vice Media and studied journalism, history and Arabic at Ohio University. Laura currently lives in Washington, D.C.
Sep 28, 2016
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The benefits of the local bank extend beyond the free coffee and sweets -they offer services you may take for granted, such as cashing your checks at no cost and loans that offer reasonable rates of interest. But for the greater than 9.5 million unbanked households in the U.S., these services have a steep cost which NerdWallet discovered can add up to hundreds of dollars a year.
Within the U.S., 7.7% of households didn’t have any members who had a bank account as per the 2013 FDIC National Survey of Bankrupt and Underbanked Households, which is the most current set of data available. It was a decrease from the 2011 version of the FDIC’s Federal Deposit Insurance Corp.’s biannual survey, and it decreased to 7% by 2015, according to a preview of the latest version, due to be available in October.
Benefits not used, additional fees
Although less families are turning away from financial institutions, those who do are missing out on opportunities to save up for emergencies, and secured credit cards that help build credit. They’re not able to take advantage of the full range of protections against fraud that federally insured banks and credit unions provide as well as access to online or mobile banking tools which can save the time as well as money. (Read NerdWallet’s national coverage on the topic to find out more about alternatives for non-banked consumers, including .)
households that do not have a bank account also incur a lot of charges to financial-service providers that are expensive alternatives. NerdWallet calculated the costs of money orders, check cashing and debit cards that are prepaid. Unbanked households that use an prepaid debit card that allows direct deposit pay an annual average for $196.50 in fees, while unbanked households that make use of a prepaid debit cards that does not allow direct deposit pay an average annual amount of $488.89 in fees. (See our complete methodology for more information.)
Unbanked households are reported by metro and state
We examined the $196.50 as well as the $488.89 figures as percentages of each state’s 2013 average income for households that do not have an account with a bank and according to FDIC data. Look at on the below map, to discover the states in which households without a bank account are the most affected by the cost of fees using both the more expensive ($488.89) as well as the less ($196.50) estimates. You can also find out which states have the highest number of households that do not have a bank account.
The table below shows the percentage of unbanked households in the 22 metro regions and across all states plus Washington, D.C. We estimated that the price of not owning an account with a bank by dividing it into the household’s income that is unbanked in the 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.
Unbanked households by metro area
UNBANKED HOUSEHOLDS ARE FINANCED BY THE
Ranking (most to least unbanked)
State
The percentage of households that aren’t banked
Average unbanked household income
Total unbanked costs of all household households (lower estimate)
Total unbanked cost across all households (higher estimate)
Costs of unbanked expenses as a percent of income (using more precise estimates)
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 key
1. The rate of unbanked households is significantly higher for low-income households. Nationally, 7.7% of households did not have a bank account in 2013, however, this rate was significantly more so for low-income households. Around 20% of households that had incomes of less than $30,000 were unbanked and 24% were not banked, meaning they had minimum one or more savings accounts or but had used at least one alternative financial service in the past year. These kinds of services include cashing checks or money orders, as well as payday loans. More than one third (35.6%) of unbanked households surveyed in the FDIC report said the main reason they don’t have an account was because they didn’t have enough money to fund an account or meet the minimum balance. (Note that a lot of households don’t need minimal balances.) Other common reasons included dislike or distrust of banks and high or unpredictable charges for account accounts.
The nationwide correlation between unbanked and low-income households translates to the state level. Seven of the 10 states with the highest proportions of nonbanked individuals are among the states with one of the highest median family incomes according to the 2013 U.S. Census American Community Survey. In fact, excepting Washington, D.C., the nine states with the highest concentration of households without bank accounts had incomes for households less than the 2013 U.S. median of $52,250.
2. The cost of not having a bank account hit low-income households the hardest households: The income of households without an account with a bank is especially small. The average income after tax of households that were not banked across the U.S. was $17,359, and was lowest in Montana at $11,963.
Remember that unbanked households that utilize a prepaid debit card that does not direct deposit, pay the equivalent of $488.89 in fees annually. In Montana this would be upward of 4% of the average unbanked household’s income. To give you a sense of scale, the average U.S. household spent about 3.5% of its income after tax on fuel or motor oil during 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 fully banked households in D.C. was $55,032, however, it was only $14,588 for households without having a bank account. This figure isn’t going to get much further in a country in which housing options for low-income households are diminishing. According to a D.C. Fiscal Policy report 2013 there were only half the number of Washington homes that were rented under $800 per month than the 2002. The report suggests «subsidized housing is currently the sole source of affordable apartment units.»
3. Unbanked local demographics reflect national trends: According the FDIC One-fifth of households with black names (20.5 percent) across the U.S. in 2013 were unbanked, followed by Hispanic (17.9 percent) and American Indian/Alaskan households (16.9%). The figure was just 2.2% of Asian households had no bank accounts, which was a lower proportion than that of white (3.6 percent) and Hawaiian/Pacific Islander (6.1 percent) households.
The areas that have the highest percentage of households without bank accounts reflect the national demographics. In No. 12 Tennessee and No. 2 Louisiana the largest state city is home to a large percentage of black residents in both cities, with Memphis at 63% and New Orleans at 59.8%. Phoenix is at the top of our list of cities that aren’t banked, has a large Hispanic population, as does Albuquerque, the largest metropolis located in New Mexico, which tied with the seventh largest state. Two states with the highest percentages of people who are not banked, New Mexico and Oklahoma, have American Indian populations nearly 10 times that of that of the U.S. as a whole.
4. Limited access to in-person and online banking can be a hindrance it to create a bank account if there are no branches where you live. More than half of ZIP areas in mid-South are «bank deserts,» that is, they’ve only one or no branch banks, according to the Mississippi-based Hope Policy Institute, which analyzes financial inclusion. According to the study of the Hope Policy Institute, the mid-South includes Mississippi, Louisiana and Arkansas, which have some of the highest rates of households that are not banked. It also encompasses the western part of Tennessee where is the home of Memphis, where almost one-fifth (19.5 percent) of households don’t have accounts with banks.
Brick-and-mortar branches are even more crucial for those who are unable to connect to banks online. Certain Memphis residents have difficulties with both methods. Based on the U.S. Census Bureau’s 2013 American Community Survey, 27.7% of Memphis households did not have access to the internet, compared with 21.4 percent nationwide. The number of people without internet access is a major issue across New Orleans, too, with 27.4%.
Sreekar Jasthi is a data analyst at NerdWallet, a personal finance website. Email: . Laura McMullen is a staff writer at NerdWallet. Email: . Twitter: .
Methodology
Income and concentrations of households with no bank accounts
To calculate the average income of households that are not banked nationwide and in each state, we used data from the . To determine which metro areas to examine, we first chose the 25 areas in the FDIC report that had the largest number of households. We omitted San Diego-Carlsbad-San Marcos, California; Sacramento-Arden-Arcade-Roseville, California; and San Antonio, Texas, because of insufficient income data.
Figures for the percentage of households that are not banked across each state or metropolitan area are also derived from the FDIC report.
Costs associated with not having a bank account
We arrived at the range from $196.50 between $196.50 and $488.89 in charges for an average unbanked household by adding the fees associated with cash checking or money orders, as well as prepaid debit cards. The cost of these fees will depend on the extent to which these households’ prepaid debit cards allow direct deposit.
To calculate the cost of check cashing for households that are not banked and use debit cards that do not require direct deposit or for those with cash only we assumed two pay checks that were cashed each month, and a cost of 1% of a check’s total value. For households that use debit cards that are prepaid and have direct deposit option, we added $0 for check cashing. For both household types we assumed one cash payment per month, with an average charge of $1.40.
To determine the average of check cashing and money order fees, we used the FDIC’s statistics regarding how often alternative financial services used by each kind of household (banked or unbanked) Then we used the lower frequency of usage among households with bank accounts to the average cost.
In order to calculate the annual average cost of prepaid debit cards we examined 69 cards based on major issuers, high-traffic search volume, Pew Charitable Trust’s and the cards listed on ‘s and ‘s websites. For cards that offer several plans We counted every plan as a distinct card.
The report includes the annual costs of a prepaid debit card with direct deposit and without direct deposit for payroll. The median monthly fee used was $4.98, and the median out-of-network ATM cost was $2.50. We paid the maximum fee for cash loading of $4.95.
In the absence of direct deposit, we had 12 monthly charges as well as four ATM charges per month and the two fees for cash loading per month. Signature-based and PIN-based purchase transaction fees typically don’t apply to cards that have monthly fees, which is why we omitted them.
Upcoming FDIC survey
A recent preview of the 2015 FDIC National Survey of Unbanked as well as Underbanked Households, set for release in full on October. 20, 2016, revealed that the unbanked rate dropped to 7.7%, which is around 8.6 million households. NerdWallet’s analysis is based on the most up-to-date set of information available.
Author bios: Laura McMullen writes about managing the money of NerdWallet. Her writing has been featured on The Associated Press, The New York Times, The Washington Post and many other outlets.
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