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States in the United States and Metro Areas With the Most Unbanked Households
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States and Metro Areas With the Most Unbanked Households
by Laura McMullen Assistant Assigning Editor Personal finance, financial news Laura McMullen assigns and edits the financial news content. She was previously a senior writer at NerdWallet and was responsible for budgeting, saving and making money. She also contributed to the «Millennial Financial» column for The Associated Press. Prior to making the move to NerdWallet as of the year 2015 Laura worked for U.S. News & World Report, where she edited and wrote articles on health, careers and education and also worked on the company’s ranking projects. Before joining U.S. News & World Report, Laura interned at Vice Media and studied journalism as well as history and Arabic at 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 the free coffee and sweets -they offer services you might take for granted, such as cashing checks for free and loans with reasonable interest rates. But for the more than 9.5 million people who aren’t banked across the U.S., these services are expensive which NerdWallet discovered can add hundreds of dollars a year.
The U.S., 7.7% of households had no members with a bank account according to the 2013 FDIC National Survey of Bankrupt and Underbanked households, the most recent full set of data available. It was a decrease from the 2011 edition of the FDIC’s Federal Deposit Insurance Corp.’s biannual survey, and it fell 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 banks, the ones who are miss out on , in which they can create emergency funds, as well as secured credit cards that can help build credit. They’re not able to take advantage of the entire array of fraud protections that federally insured banks as well as credit unions offer as well as access to the online and mobile banking options which can save the time as well as money. (Read NerdWallet’s coverage of the nation on the topic to find out more about the options available to unbanked consumers, including .)
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 checks, cashing orders and pre-paid debit cards. The households with no bank accounts that have a prepaid debit card that permits direct deposit pay an average annual amount for $196.50 in fees. On the other hand, unbanked households that utilize a prepaid debit card with no direct deposit have an annual average of $488.89 in fees. (See our complete methodology for more details.)
Unbanked households are reported by metro and state
We looked at the $196.50 in addition to the $488.89 figures as percentages of each state’s average 2013 income for households who don’t have a bank account that are based on FDIC data. Check out the map below to discover the states where households that aren’t banked are hit the hardest by the cost of fees, using both the higher ($488.89) and the lower ($196.50) figures. You can also find out where the states with the greatest percentage of households that do not have a bank account.
The tables below show the percentage of unbanked households in the 22 metro areas and in all states, plus Washington, D.C. We estimated the cost of not having accounts with banks by dividing it into the household’s income that is unbanked 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
Rank (most to least unbanked)
State
The percentage of households that aren’t banked
Average unbanked household income
Total unbanked cost to all families (lower estimate)
Total unbanked costs across all families (higher estimate)
Costs unbanked average as a percentage 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%
The most important lessons to take away
1. The rate of unbanked households is disproportionately high among low-income households: Nationally, 7.7% of households did not have a bank account in 2013, but this rate was significantly more so for low-income households. About 20% of households that had incomes below $30,000 had no bank accounts, and 24% of them were unbanked that is, they have more than one saving account or but had used at least one alternative financial service in the past year. These services include check cashing as well as money orders and payday loans. More than three-quarters (35.6 percent) of households that were not banked for the FDIC report indicated that the primary reason they didn’t have an account is that they don’t have enough money to fund an account or meet the minimum balance. (Note that many do not require minimum balances.) Other reasons that are common include distaste or distrust for banks, and the high or unpredictability of charges for account accounts.
The correlation of the national population between bank-independent and low-income households is reflected at the state-level. Seven of the states with the highest percentages of unbanked 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 percentage of households without bank accounts were home to households with incomes that were below the 2013 U.S. median of $52,250.
2. The costs of being unbanked are particularly affecting households with low incomes households: The income of households without an account with a bank is especially low. The average income after tax of unbanked households in the U.S. was $17,359, and was lowest in Montana at $11,963.
Keep in mind that households with no bank accounts who utilize a prepaid debit card that does not direct deposit, are charged on average $488.89 in fees per year. In Montana this would be upward of 4 percent of the average unbanked household’s income. To give you a sense of scale, the average U.S. household spent about 3.5 percent of its post-tax income on gas as well as motor oils in the year 2015, in accordance with the U.S. Bureau of Labor Statistics.
In Washington, D.C., the gap in income between banked and unbanked households is huge. The average income in 2013 for households that had a bank account D.C. was $55,032, but that was only $14,588 for households that didn’t have having a bank account. This figure isn’t going to get much further in a country where low-income housing opportunities are shrinking. According to the D.C. Fiscal Policy report, in 2013, there were roughly half the number of Washington homes that were rented at less than $880 per month than they had in 2002. The report concludes that «subsidized housing is now virtually the sole source of affordable housing.»
3. The local unbanked population reflects national trends: According the FDIC, one-fifth of households with black names (20.5%) across the U.S. in 2013 were not banked, followed by Hispanic (17.9%) along with American Indian/Alaskan families (16.9 percent). The figure was just 2.2 percent of Asian households had no bank accounts This was a smaller proportion than that of white (3.6%) and Pacific Islander and Hawaiian (6.1%) households.
A lot of the areas with the highest percentage of households that are not banked mirror these national demographics. In No. 12 Tennessee as well as No. 2 Louisiana, the state’s largest city, has a high percentage of black households and the largest cities are Memphis at 63 percent and New Orleans at 59.8%. Phoenix, which tops our list of cities that aren’t banked, has a large Hispanic population as does Albuquerque which is the biggest city located in New Mexico, which tied with the seventh largest state. Two states that have the highest percentages of people who are not banked, New Mexico and Oklahoma are home to 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 hurts: It’s hard 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,» meaning they have just one or zero branch banks, according to the MS-based Hope Policy Institute, which studies financial inclusion. In the institute’s analysis, the mid-South is comprised of Mississippi, Louisiana and Arkansas and has one of the highest percentages of unbanked households. This region includes the western region of Tennessee where is the home of Memphis, where more than one-fifth (19.5%) of households don’t have a bank account.
Brick-and-mortar stores are especially important for customers who cannot connect to financial institutions online. A few Memphis residents are unable to use both methods. Based on the U.S. Census Bureau’s 2013 American Community Survey, 27.7% of Memphis households were without an internet connection, as compared with 21.4 percent nationwide. The number of people without internet access is a major issue across New Orleans, too, at 27.4 percent.
Sreekar Jasthi is a data analyst at NerdWallet the personal finance website. Email: . Laura McMullen is a staff writer at NerdWallet. Email: . Twitter: .
Methodology
The income and the concentrations of households with no bank accounts
To calculate the median income of unbanked households across the nation and across all states we utilized data from the . To determine which metro regions to study we first selected the 25 in the FDIC report that contained the highest 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.
The figures for the percentage of unbanked households across each state or metropolitan region are also taken from this report. FDIC report.
Costs associated with not having a bank account
We came up with a price range between $196.50 between $196.50 and $488.89 in fees for the average household without a bank account by adding the fees related to cash checking or money orders, as well as prepaid debit cards. The price of these charges is contingent on whether these households’ debit cards are prepaid and permit direct deposit.
To figure out the costs of cashing checks for non-banked households with prepaid debit cards without direct deposit and unbanked households that only use cash we assumed two pay checks cashable per month and a charge of 1% of the check’s value. For households that use prepaid debit cards with direct deposit we added the cashing of checks at a cost of zero. For both households we assumed that there would be one money order sent per month with an average cost of $1.40.
To determine the average of check cashing and money order fees, we used FDIC’s data regarding the frequency of alternative financing services use by kind of household (banked or not), then added the less frequent use among banked households to the average costs.
To calculate the average annual cost of debit cards with prepaid options we evaluated 69 cards with the help of the major issuers, their high-traffic searches volume as well as Pew Charitable Trust’s the card offerings listed on ‘s and ‘s websites. For cards that offer several plans We counted each plan as a separate card.
The report covers the annual cost of a prepaid debit card with 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 utilized the maximum fee for cash loading of $4.95.
Without direct deposit, we had twelve monthly fees as well as four ATM charges per month and 2 cash load fees per month. Signature-based and PIN-based purchase transaction fees typically don’t apply to cards that have monthly charges, so we excluded them.
Upcoming FDIC survey
A preview of the 2015 FDIC National Survey of the Unbanked and Underbanked Households, which is scheduled for release in its entirety on Oct. 20th, 2016 The survey showed that the rate of unbanked households is now 7%, or about 8.6 million household. NerdWallet’s analysis is based on the most recent full set of information available.
The author’s bio: Laura McMullen writes about managing money for NerdWallet. Her work has appeared on The Associated Press, The New York Times, The Washington Post and many other outlets.
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