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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
by Laura McMullen Assistant Assigning Editor information Laura McMullen assigns and edits financial news content. Her previous position was as a top writer at NerdWallet and covered the process of saving, budgeting and making money; she also contributed to the «Millennial Money» column for The Associated Press. Before joining NerdWallet in 2015, Laura was employed by U.S. News & World Report which is where she wrote and edited articles on careers, wellness and education as well as contributed to the rankings of the company. Prior to joining U.S. News & World Report, Laura interned at Vice Media and studied journalism as well as history and Arabic in the Ohio University. Ohio University. Laura is a resident of Washington, D.C.
Sep 28 September 28, 2016
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The benefits of your bank aren’t limited to the free coffee and sweets -They offer things that you might consider to be a given, such as cashing checks for free and loans that offer reasonable rates of interest. However, for more than 9.5 million households that are not banked in the U.S., these services are expensive and one that NerdWallet discovered adds hundreds of dollars every year.
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, the most current collection of data available. That was down from the 2011 version of the Federal Deposit Insurance Corp.’s biannual survey, and the figure dropped to 7% in 2015, according to an overview of the most recent editionthat will be published in October.
Additional fees, missed benefits
While fewer families are avoiding financial institutions, those who are not taking advantage of , in which they can save up for emergencies, and secured credit cards that can assist in building credit. They aren’t able to benefit from the full array of fraud protections that federally insured banks and credit unions offer, and they can’t access online or mobile banking tools that could save them time and money. (Read NerdWallet’s national coverage on the topic to find out more about the options available to unbanked customers, such as .)
Households that don’t have an account with a bank also have to incur a lot of charges to expensive alternative financial-service providers. NerdWallet has compiled the cost of money orders, check cashing and debit cards that are prepaid. The households with no bank accounts that have the prepaid debit card which allows direct deposit pay an average annual amount for $196.50 in fees, while those who are not banked and use a prepaid debit card without direct deposit pay an average annual amount of $488.89 in fees. (See our complete methodology for more information.)
Unbanked households in the metro and state
We looked at the $196.50 in addition to the $488.89 figures in percentages of the state’s 2013 average income for households that do not have an account with a bank that are according to FDIC data. Explore the map below to discover the states in which households without a bank account are hit the hardest with fees using both the higher ($488.89) and lower ($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 unbanked households in 22 large metro areas , and across all states, plus Washington, D.C. We estimated that the price of not owning accounts with banks by dividing it into the average unbanked household income in the area as provided by 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
Ranking (most to least unbanked)
State
A percentage of households are not banked
The average household income is unbanked and non-banked.
Total unbanked expenses for all households (lower estimate)
Total unbanked expenses for all homes (higher estimate)
Costs of unbanked expenses as a percentage of income (using the 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%
The most important lessons to take away
1. The rate of unbanked households is disproportionately high in low-income households. Nationwide, 7.7% of households didn’t have a bank account in 2013, but this rate was significantly more so for low-income households. About twenty percent of the households that had incomes below $30,000 had no bank accounts, and 24% were underbanked which means they had at least one savings or but had employed at least one alternative financial service within the last year. These kinds of services include cashing checks, money orders and payday loans. More than a third (35.6 percent) of unbanked households surveyed in the FDIC report stated that the primary reason they didn’t have an account was that they didn’t have enough money to fund an account or to meet the minimum balance. (Note that many do not require the minimum amount of balance.) Other reasons that are common include dislike or distrust of banks and high or unpredictable charges for account accounts.
The national correlation between unbanked and low-income households is reflected at the state level. Seven of the 10 states that have the highest proportions of unbanked people are among the 10 states that have the lowest median household incomes, according to the 2013 U.S. Census American Community Survey. With the exception of Washington, D.C., the nine states with the highest percentage of households without bank accounts were home to households with incomes that were less than the 2013 U.S. median of $52,250.
2. The financial burden of not having a bank are particularly affecting households with low incomes: Income among households who don’t have an account with a bank is especially poor. The 2013 median post-tax income of unbanked households in the U.S. was $17,359, and was lowest in Montana with $11,963.
Remember that unbanked households that utilize a prepaid debit card without direct deposit have to pay on average $488.89 in fees annually. In Montana this would be upward of 4 percent of the average unbanked household’s income. For context, the average U.S. household spent about 3.5 percent of their income after tax on fuel as well as motor oils in 2015 according to 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, however, it was only $14,588 for those without an account with a bank. The latter figure doesn’t get much further in a country in which housing options for low-income households are declining. According to a D.C. Fiscal Policy report in 2013, there were about half the number of Washington apartments renting at less than $880 per month than there were in 2002. The report concludes that «subsidized housing is currently the sole source of affordable apartments.»
3. Unbanked local demographics reflect national trends: According the FDIC 1/5th of black households (20.5 percent) in the U.S. in 2013 were unbanked, followed closely by Hispanic (17.9%) as well as American Indian/Alaskan household (16.9 percent). The figure was just 2.2 percent of Asian households were unbanked this was a lower percentage than white (3.6%) and Pacific Islander/Hawaiian (6.1%) households.
Many of the places with the highest percentage of households that are not banked are in line with these national demographics. In No. 12 Tennessee and No. 2 Louisiana, each state’s biggest city, has a high percentage of black households in both cities, with Memphis at 63 percent as well as New Orleans at 59.8%. Phoenix is the top city on our list of unbanked metros, has a large Hispanic population, as does Albuquerque which is the largest metropolis located in New Mexico, which tied with seventh place among states. Two states that have the highest percentages of unbanked populations, New Mexico and Oklahoma, have American Indian populations nearly 10 times higher than the U.S. as a whole.
4. In-person access is limited and online banking can be a hindrance it’s difficult to create a bank account if there are no branches where you reside. More than half of ZIP code in the middle of South are «bank deserts,» that is, they’ve the same or fewer bank branches, according to the MS-based Hope Policy Institute, which analyzes financial inclusion. In the institute’s analysis, the mid-South comprises Mississippi, Louisiana and Arkansas and has some of the highest proportions of households that are not banked. It also encompasses western Tennessee, home to Memphis which is where almost one-fifth (19.5%) of households do not have accounts with banks.
Brick-and-mortar branches are even more crucial for those who are unable to connect to financial institutions via the internet. Some Memphis residents face hurdles to both methods. Based on the U.S. Census Bureau’s 2013 American Community Survey, 27.7% of Memphis households didn’t have access to the internet, compared with 21.4% nationwide. Lack of internet access is high in New Orleans, too, at 27.4%.
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
Income and concentrations of households that are not banked
To determine the median income of households that are not banked nationwide and in each state we used information from the . To determine which metro areas to examine, we first chose the 25 in the FDIC report that had 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 figures for the percentage of households that are not banked in each state and metropolitan area are also from FDIC’s report. FDIC report.
Costs associated with not having a bank account
We found a range between $196.50 up to $488.89 in fees for the average household without a bank account by adding in the fees related to cash checking as well as money orders and prepaid debit cards. The cost of these fees will depend on the extent to which the debit cards are prepaid and permit direct deposit.
To calculate the cost of check cashing for unbanked households using debit cards prepaid without direct deposit or for those using only cash We assumed two checks that were cashed each month, and a cost of 1% of a check’s total value. For those who use debit cards prepaid with direct deposit we accounted for the cashing of checks at a cost of zero. For both types of households we assumed that there would be one money order sent 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 information on how often alternative financing services utilized by the households of different types (banked or unbanked) Then we used the lower frequency of use by households that are banked to the average cost.
To calculate the average annual cost of debit cards that are prepaid We looked at 69 cards, that were based on the major issuers, their high-traffic searches volume as well as Pew Charitable Trust’s the card offerings listed on the websites of’s and. For cards that offer several plans we considered each plan as an individual card.
The study includes the annual cost of an prepaid debit card 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 utilized the maximum cash loading fee of $4.95.
In the absence of direct deposit, we assumed 12 monthly charges, four ATM charges per month and the two fees for cash loading per month. PIN- and signature-based purchase transaction fees usually don’t apply to cards with monthly fees, so we excluded them.
Upcoming FDIC survey
A recent preview of 2015. FDIC National Survey of the Unbanked and Underbanked Households, set to be released in all its entirety on Oct. 20, 2016 It revealed that the unbanked rate has fallen to 7.7%, which is around 8.6 million households. NerdWallet’s analysis is based on the most up-to-date set of data available.
Author bios: Laura McMullen writes about managing the money of NerdWallet. Her work has appeared on The Associated Press, The New York Times, The Washington Post, and other publications.
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