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States as well as Metro Areas With the Most Unbanked Households

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States in the United States and Metro Areas With the Most Unbanked Households

The author is Laura McMullen Assistant Assigning Editor Financial, personal finance 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 has also written for the «Millennial Financial» column of The Associated Press. Prior to joining NerdWallet as of the year 2015 Laura worked for U.S. News & World Report which is where she edited and wrote articles on the health and wellness of students, careers and other topics and also contributed to the company’s ranking projects. Before working at U.S. News & World Report, Laura interned at Vice Media and studied journalism as well as history and Arabic at Ohio University. Laura is a resident of Washington, D.C.

Sep 28, 2016

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The perks at the local bank extend beyond complimentary coffee and chocolate- they include things you may take for granted, such as free check cashing and loans that offer reasonable rates of interest. But for the more than 9.5 million households that are not banked across the U.S., these services have a steep cost which NerdWallet discovered can add up to hundreds of dollars per year.

Within the U.S., 7.7% of households had no members with a bank account, as per the 2013 FDIC National Survey of Unbanked and Underbanked Households, the most up-to-date collection of data available. That was down from the 2011 version of FDIC’s Federal Deposit Insurance Corp.’s biannual survey, and the figure dropped to 7% in 2015, as per a preview of the latest edition, which will be published in October.

Additional fees, missed benefits

Although fewer families are forgoing banks, the ones who are not taking advantage of opportunities to save up for emergencies, and secured credit cards that can assist in building credit. They’re not able to take advantage of the full array of fraud protections that federally insured banks and credit unions offer, and they can’t access the online and mobile banking options that can save them the time as well as money. (Read NerdWallet’s national coverage on the to learn more about alternatives for non-banked consumers, like .)

Families without accounts with banks also have to pay a lot of fees to expensive alternative financial-service providers. NerdWallet has compiled the cost of money order, check cashing, and debit cards that are prepaid. The households with no bank accounts that have the prepaid debit card which allows direct deposit can pay an average annual amount in the amount of $196.50 in fees, while those who are not banked and 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 in the metropolitan and state

We looked at our $196.50 as well as the $488.89 figures as percentages of each state’s average 2013 income for households that do not have an account with a bank and based on FDIC data. Check out the map below to discover the states where unbanked households are the most affected by the cost of fees, using both the higher ($488.89) as well as the less ($196.50) figures. It is also possible to see where the states with the greatest number of households that do not have a bank account.

The tables below illustrate the percentage of households without a bank account in 22 large metro regions and across all states, plus Washington, D.C. We estimated costs of having a bank account 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 HOMEHOLDS BY STATE

Ranking (most to least unbanked)

State

Percentage of all households that aren’t banked

Income of a household that is not banked

Total unbanked expenses of all household households (lower estimate)

Total unbanked costs of all household families (higher estimate)

Costs unbanked average as a 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%

Key lessons to take away

1. The rate of unbanked households is significantly higher in low-income households. Nationwide, 7.7% of households didn’t have a bank account in 2013, however this rate was significantly higher among low-income households. Around 20percent of families with incomes of less than $30,000 had no bank accounts, and 24% of them were unbanked which means they had more than one saving account account or but had utilized at least one other financial service in the past year. These kinds of services include cashing checks, money orders and payday loans. More than a third (35.6 percent) of the households without bank accounts surveyed in the FDIC report said the main reason for not having an account was because they didn’t have enough money to keep in an account, or to maintain the minimum balance. (Note that many do not require the minimum amount of balance.) Some of the most common reasons are the distrust or dislike of banks, as well as high or unpredictability of fees for accounts.

The nationwide correlation between unbanked and low-income households can be seen at the state-level. Seven of the 10 states that have the highest proportions of unbanked people are among the states with one of the highest median family incomes, according to the 2013 U.S. Census American Community Survey. Except for Washington, D.C., the nine states with the highest percentage of households without bank accounts had incomes for households lower 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 without a bank account is particularly low. The 2013 median post-tax income of unbanked households in the U.S. was $17,359, and was the lowest in Montana with $11,963.

Remember that unbanked households that use a prepaid debit card with no direct deposit have to pay an average of $488.89 in annual fees. In Montana the amount would be up to 4 percent of an average unbanked household’s income. For context, the average U.S. household spent about 3.5% of its income after tax on fuel as well as motor oils in the year 2015 as per the U.S. Bureau of Labor Statistics.

In Washington, D.C., the disparity in earnings between households with bank accounts and those without is huge. 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 having a bank account. That latter number can’t get much further in a country where housing options for those with low incomes are diminishing. According to a D.C. Fiscal Policy report 2013 there were only half the number of Washington homes that were rented at less than $880 a month than they had in 2002. The report states that «subsidized housing is now the only source for affordable apartments.»

3. The local unbanked population reflects national trends: According to the FDIC 1/5th of black households (20.5%) across the U.S. in 2013 were unbanked, followed by Hispanic (17.9 percent) as well as American Indian/Alaskan household (16.9 percent). Just 2.2 percent of Asian households were not banked, which was a lower concentration than for white (3.6 percent) and Pacific Islander/Hawaiian (6.1%) households.

The areas that have the highest concentration of households without bank accounts reflect the national demographics. In No. 12, Tennessee in addition to No. 2 Louisiana, the state’s largest city has a majority of black residents, with Memphis at 63 percent as well as New Orleans at 59.8%. Phoenix is the top city on our list of unbanked metros is home to a substantial Hispanic population and Albuquerque which is the biggest metropolis in New Mexico, which tied for seventh among the states. Two states that have the highest percentages of unbanked populations, New Mexico and Oklahoma are home to American Indian populations nearly 10 times higher than the U.S. as a whole.

4. Access to only in-person and online banking is a problem it to open a bank account when there aren’t any branches near where you live. Nearly half of the ZIP code in the middle of South region are «bank deserts,» which means they’ve got the same or fewer branch banks, according to the Mississippi-based Hope Policy Institute, which analyzes financial inclusion. The analysis of the institute shows that the mid-South comprises Mississippi, Louisiana and Arkansas, which have some of the highest proportions of households that are not banked. This region includes the western part of Tennessee, home to Memphis in which more than one-fifth (19.5 percent) of households don’t have accounts with banks.

Brick-and-mortar locations are more crucial for those who are unable to connect to financial institutions 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 didn’t have access to the internet, compared with 21.4 percent across the country. Lack of internet access is high across New Orleans, too, with 27.4%.

Sreekar Jasthi is a data analyst at NerdWallet, a personal finance site. Email: . Laura McMullen is a staff writer at NerdWallet. Email: . Twitter: .

Methodology

The income and the concentrations of households with no bank accounts

To determine the median income for unbanked households nationwide and across each state, we took data from the . To identify which metro regions to study We first picked 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 percentages of households with no bank accounts within each state as well as metro region are also taken from the FDIC report.

Fees associated with being unbanked

We arrived at the interval of $196.50 between $196.50 and $488.89 in fees for the average unbanked household when we added the costs associated with cash checking, money orders and prepaid debit cards. The price of these charges is contingent on whether the households’ prepaid debit cards allow direct deposit.

To determine the check-cashing costs for unbanked households using debit cards prepaid without direct deposit or for those using only cash, we assumed two paychecks cashed per month and a cost that is 1% of a check’s value. For households that use prepaid debit cards with direct deposit we accounted for $0 for check cashing. 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 cashing of checks and money order fees, we used FDIC’s data on what frequency alternative financial services used by each type of household (banked or not) Then we used the lower frequency of use by households that are banked to the cost average.

To calculate the average annual cost of debit cards with prepaid options, we examined 69 cards with the help of major issuers, high-traffic search volume, Pew Charitable Trust’s and the cards listed on ‘s and ‘s websites. For cards with several plans we considered each plan as an individual card.

The report includes the annual cost of a prepaid debit card with and without direct deposit to pay payroll. The median monthly cost used was $4.98 The median out-of-network ATM fee was $2.50. We used the maximum cash loading fee of $4.95.

In the absence of the direct deposit option, we had 12 monthly fees as well as four ATM fees per month , and two cash loading fees each month. PIN- and signature-based purchase transaction fees aren’t usually applicable to cards that have monthly fees, which is why we omitted them.

Upcoming FDIC survey

A recent preview of 2015. FDIC National Survey of Unbanked and Underbanked Households, scheduled to go public in all its entirety on October. 20, 2016, revealed that the number of households without a bank account dropped to 7%, or about 8.6 million households. NerdWallet’s analysis is based on the most up-to-date set of data available.

The author’s bio: Laura McMullen writes about managing money for NerdWallet. Her work has appeared in The Associated Press, The New York Times, The Washington Post as well as other publications.

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