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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 Personal finance, financial and news Laura McMullen assigns and edits financial news content. She was previously a senior writer at NerdWallet and was responsible for the process of saving, budgeting and making money. She also contributed to the «Millennial Financial» column for The Associated Press. Prior to making the move to NerdWallet in 2015, Laura was employed by U.S. News & World Report which is where she created and edited articles on 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 at Ohio University. Laura lives in Washington, D.C.
Sep 28 September 28, 2016
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The benefits at your bank aren’t limited to complimentary coffee and chocolateThey offer things that you might consider to be a given, such as cashing checks for free and loans with reasonable interest rates. But for the more than 9.5 million households that are not banked in the U.S., these services are expensive which NerdWallet discovered can add up to hundreds of dollars a year.
Within the U.S., 7.7% of households had no members with a bank account in the latest FDIC Nationwide Survey of Bankrupt and Underbanked Households, the most up-to-date set of information available. This was lower than the 2011 version of the Federal Deposit Insurance Corp.’s biannual survey, and it fell to 7% in 2015, according to a preview of the latest edition, which will be available in October.
Benefits not used, additional fees
Although less families are turning away from banks, the ones who do are missing out on opportunities to save up for emergencies, and secured credit cards which can aid in building credit. They aren’t able to benefit from the entire array of protections against fraud that federally insured banks and credit unions provide as well as access to online or mobile banking tools that can save them time and money. (Read NerdWallet’s coverage of the nation on the to learn more about alternatives for non-banked consumers, like .)
Families without a bank account also have to pay a lot of fees to costly alternative financial service providers. NerdWallet calculated the costs of money checks, cashing orders and prepaid debit cards. The households with no bank accounts that have a prepaid debit card that permits direct deposit pay an annual average for $196.50 in fees. On the other hand, unbanked households that make use of a prepaid debit cards that does not allow direct deposit pay an annual average of $488.89 in fees. (See our full methodology for more information.)
Unbanked households by state and metro area
We examined our $196.50 in addition to the $488.89 figures as percentages of each state’s 2013 average income for households who don’t have accounts with banks, according to FDIC data. Look at on the below map, to find the states where households that aren’t banked are hit the hardest by fees using both the more expensive ($488.89) as well as the less ($196.50) figures. You can also find out where the states with the greatest number of households that do not have a bank account.
The table below shows the percentage of unbanked households in the 22 metro areas and in all states and Washington, D.C. We calculated costs of having accounts with banks in percentages of the household income of households that are not banked in that 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.
In metro areas, households are not banked.
UNBANKED HOUSEHOLDS ARE FINANCED BY THE
Ranking (most to least unbanked)
State
A percentage of households are unbanked
Average unbanked household income
Total unbanked expenses to all families (lower estimate)
Total unbanked cost of all household families (higher estimate)
Costs unbanked average as a percentage 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 key
1. The percentage of households without a bank account is disproportionately high for low-income households. Nationally, 7.7% of households had no bank accounts in 2013, but the rate was much more so for low-income households. About 20percent of families with incomes of less than $30,000 had no bank accounts, and 24% were underbanked, meaning they had minimum one or more savings accounts account or but had utilized at least one other financial service during the previous year. These kinds of services include cashing checks, money orders and payday loans. More than one third (35.6%) of unbanked households surveyed for the FDIC report indicated that the primary reason they don’t have an account was that they didn’t have enough money to keep in an account or meet the minimum balance. (Note that many don’t require minimum balances.) Other reasons that are common include the distrust or dislike of banks, as well as high or unpredictability of fees for accounts.
The national correlation between unbanked and low-income households translates to the state level. Seven of the states with the highest proportions of nonbanked residents are among the 10 states with the lowest median household incomes, in the latest U.S. Census American Community Survey. In fact, excepting Washington, D.C., the nine states with the highest concentration of households that were not banked had household incomes less than the median of the 2013 U.S. median of $52,250.
2. The cost of not having a bank account are particularly affecting households with low incomes households: The income of households who don’t have accounts with banks is especially poor. The 2013 median post-tax income of unbanked households across the U.S. was $17,359, and was the lowest in Montana at $11,963.
Keep in mind that households with no bank accounts who use a prepaid debit card without direct deposit have to pay on average $488.89 in fees per year. In Montana, that would consume up to 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 post-tax income on gas or motor oil during 2015 in accordance with the U.S. Bureau of Labor Statistics.
The situation in Washington, D.C., the difference in earnings between households with bank accounts and those without is huge. The average income in 2013 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. This figure isn’t going to go far in a place in which housing options for low-income households are shrinking. According to a D.C. Fiscal Policy report 2013 there were about half the number of Washington homes that were rented for less than $800 per month than there were in 2002. The report states that «subsidized housing is currently the only source for affordable apartments.»
3. Unbanked local demographics reflect national trends: According the FDIC, one-fifth of households with black names (20.5 percent) within the U.S. in 2013 were unbanked, followed closely by Hispanic (17.9%) as well as American Indian/Alaskan household (16.9 percent). Only 2.2% of Asian households were unbanked This was a smaller percentage than white (3.6 percent) and Pacific Islander and Hawaiian (6.1 percentage) households.
The areas that have the highest percentage of unbanked households reflect the national demographics. In No. twelve Tennessee in addition to No. 2 Louisiana the largest state city, has a high percentage of black households in both cities, with Memphis at 63 percent and New Orleans at 59.8%. Phoenix is at the top of our list of metros that are not banked with a significant Hispanic community, as does Albuquerque which is 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 are home to American Indian populations nearly 10 times that of the U.S. as a whole.
4. In-person access is limited and online banking hurts it to get a bank account opened if there are no branches where you live. More than half the ZIP codes in the mid-South region are «bank deserts» meaning they have the same or fewer banks, as per the MS-based Hope Policy Institute, which examines the financial inclusion. The analysis of the institute shows that the mid-South is comprised of Mississippi, Louisiana and Arkansas where there are some of the highest rates of unbanked households. It also encompasses the western part of Tennessee, home to Memphis in which more than one-fifth (19.5%) of households do not have a bank account.
Brick-and-mortar locations are more important for customers who cannot connect to financial institutions online. Some Memphis residents are unable to use both of these methods. Based on the U.S. Census Bureau’s 2013 American Community Survey, 27.7% of Memphis households didn’t have 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 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 calculate the median income of unbanked households across the nation and across each state we used information from the . To decide which metropolitan areas to examine we first selected the 25 in the FDIC report that contained 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.
Figures for the percentage of households that are not banked across each state or metropolitan area are also derived from this report. FDIC report.
Charges that are incurred when you’re not a banker
We came up with a price range between $196.50 up to $488.89 in charges for an typical household that is not banked, by adding in the fees associated with cash checking as well as money orders and prepaid debit cards. The price of these charges depends in part on whether these households’ debit cards are prepaid and allow direct deposit.
To figure out the costs of cashing checks for unbanked households using debit cards prepaid without direct deposit and unbanked households that only use cash We assumed two checks cashed per month and a charge of 1% of the check’s value. For those who use prepaid debit cards with direct deposit we added $0 for check cashing. For both households we assumed that there would be one money payment per month, with an average charge of $1.40.
To determine the average cashing of checks and money order fees, we analyzed the FDIC’s information regarding the frequency of alternative financial services utilized by the kind of household (banked or unbanked) Then we applied the lower frequency of use among banked households to the average costs.
To determine the average annual cost of debit cards that are prepaid, we looked at 69 cards, with the help of major issuers, search volume, Pew Charitable Trust’s and the cards listed on the websites of’s and. For cards with multiple plan options, we counted each plan as an individual card.
The report includes the annual costs of a prepaid debit card with and without direct deposit to pay payroll. The median monthly cost used was $4.98 and the median out-of-network ATM fee was $2.50. We paid the maximum fee for cash loading of $4.95.
Without direct deposit, we assumed 12 monthly fees as well as four ATM charges per month and two cash loading fees per month. PIN- and signature-based purchase transaction fees typically don’t apply to cards that have monthly fees, which is why we excluded them.
Upcoming FDIC survey
A recent preview of 2015 FDIC National Survey of the Unbanked and Underbanked Households, scheduled to be released in full on Oct. 20, 2016, revealed that the unbanked rate dropped to 7%, or about 8.6 million household. NerdWallet’s analysis is based upon the most current set of information 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, and other outlets.
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