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 Financial, personal finance news Laura McMullen assigns and edits the financial news content. Laura was previously the senior journalist at NerdWallet and wrote about budgeting, saving and making money. She was also a contributor to «Millennial Financial» column in The Associated Press. Prior to making the move to NerdWallet as of the year 2015 Laura was employed by U.S. News & World Report in which she wrote and edited articles on careers, wellness and education and also contributed to the rankings of the company. Before joining U.S. News & World Report, Laura interned at Vice Media and studied journalism as well as the history of Arabic in the Ohio University. Ohio University. Laura currently lives in Washington, D.C.
Sep 28 Sep 28, 2016
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The benefits of the local bank extend beyond complimentary coffee and chocolateThey offer things that you might take for granted for example, cashing your checks at no cost and loans with reasonable interest rates. However, for more than 9.5 million unbanked households across the U.S., these services are expensive, one that NerdWallet discovered adds up to hundreds of dollars a year.
Within the U.S., 7.7% of households didn’t have any members with a bank account, as per the 2013 FDIC National Survey of Bankrupt and Underbanked Households, the most up-to-date collection of data available. This was lower than the 2011 edition of the Federal Deposit Insurance Corp.’s biannual survey, and the number decreased to 7% by 2015, according to an overview of the most recent edition, which will be released in October.
Missed benefits, added fees
Although fewer families are forgoing banks, the ones who are miss out on the opportunity to save up for emergencies, and secured credit cards that can help build credit. They aren’t able to benefit from the full range of protections against fraud that federally insured banks and credit unions offer, and they can’t access online or mobile banking tools which can save time and money. (Read NerdWallet’s coverage of the nation on the to learn more about the options available to unbanked customers, such as .)
Families without an account with a bank also have to incur a lot of charges to financial-service providers that are expensive alternatives. NerdWallet calculated the costs of money order, check cashing, and prepaid debit cards. Unbanked households that use the prepaid debit card which permits direct deposit pay an annual average in the amount of $196.50 in fees, while those without banks who utilize a prepaid debit card without direct deposit pay an annual average of $488.89 in charges. (See our full methodology for more details.)
Unbanked households in the metro and state
We looked at the $196.50 and $488.89 figures as percentages of each state’s average 2013 income for households who don’t have accounts with banks and using FDIC data. Look at this map to discover the states in which households without a bank account are the most affected with fees using both the more expensive ($488.89) and the lower ($196.50) estimates. It is also possible to see which states have the highest proportion of households that do not have a bank account.
The tables below illustrate the percentage of unbanked households in 22 metropolitan regions and across all states, plus Washington, D.C. We calculated the cost of not having an account with a bank in percentages of the household income of households that are not banked within the metro 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.
In metro areas, households are not banked.
UNBANKED HOUSEHOLDS BY state
The Rank (most to least)
State
The percentage of households that aren’t banked
Average unbanked household income
Total unbanked cost for all households (lower estimate)
Total unbanked expenses across all homes (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%
Key key
1. The rate of unbanked households is particularly high among low-income households: Nationally, 7.7% of households did not have a bank account in 2013, however, that rate was noticeably higher among low-income households. Nearly twenty percent of the households that had incomes of less than $30,000 had no bank accounts, and 24% of them were unbanked which means they had at least one savings or but utilized at least one other financial service during the previous year. These services include cashing checks as well as money orders and payday loans. More than a third (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 didn’t have enough funds to maintain an account, or to maintain the required minimum balance. (Note that a lot of households don’t need minimal balances.) Some of the most common reasons are dislike or distrust of banks, and the high or unpredictability of charges for account accounts.
The nationwide correlation between unbanked and low-income households translates to the state-level. Seven of the states with the highest percentages of unbanked residents are among the 10 states with the lowest median household incomes in the latest U.S. Census American Community Survey. Except for Washington, D.C., the nine states with the highest proportion of households without bank accounts had incomes for households 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 that don’t have a bank account is particularly low. The 2013 median post-tax income of households that were not banked in the U.S. was $17,359, and the lowest was in Montana at $11,963.
Remember that unbanked households that utilize a prepaid debit card without direct deposit are charged on average $488.89 in annual fees. In Montana the amount would be more than 4 percent of the typical household’s income that is unbanked. To give you a sense of scale, the average U.S. household spent about 3.5% of its post-tax earnings on gasoline and motor oil in 2015, as per the U.S. Bureau of Labor Statistics.
In Washington, D.C., the gap in income between banked and unbanked households is staggering. The average income in 2013 for fully banked households in D.C. was $55,032, however, it was only $14,588 for households without having a bank account. That latter number can’t be much more than a few dollars in a city where low-income housing opportunities are shrinking. According to an D.C. Fiscal Policy report 2013 there were roughly half as many Washington apartment rentals for less than $800 a month than the 2002. The report suggests «subsidized housing is now the only source for affordable housing.»
3. Unbanked local demographics reflect national trends: According the FDIC, one-fifth of households with black names (20.5%) in the U.S. in 2013 were not banked, followed by Hispanic (17.9%) and American Indian/Alaskan households (16.9 percent). Just 2.2 percent of Asian households were not banked This was a smaller percentage than white (3.6 percent) and Pacific Islander/Hawaiian (6.1%) households.
A lot of the areas with the highest concentration of households that are not banked reflect the national demographics. In No. 12 Tennessee and No. 2 Louisiana, the state’s largest city is home to a large percentage of black households and the largest cities are Memphis at 63 percent while 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 which is the largest town within New Mexico, which tied for seventh among the states. Two states with the highest proportions of unbanked populations, New Mexico and Oklahoma are home to American Indian populations nearly 10 times the size of that of the U.S. as a whole.
4. In-person access is limited and online banking is a problem it’s difficult to open a bank account when there aren’t branches in the area you reside. More than half of ZIP codes in the mid-South region are «bank deserts» that is, they’ve the same or fewer bank branches, according to the Mississippi-based Hope Policy Institute, which examines the financial inclusion. According to the study of the Hope Policy Institute, the mid-South is comprised of Mississippi, Louisiana and Arkansas where there are some of the highest proportions of households that are not banked. The region also includes the western part of Tennessee which is home to Memphis which is where nearly one-fifth (19.5 percent) of households do not have an account with a bank.
Brick-and-mortar branches are even more important for customers who cannot connect to financial institutions online. Some Memphis residents face hurdles to both options. According to the U.S. Census Bureau’s 2013 American Community Survey, 27.7% of Memphis households didn’t have an internet connection, compared with 21.4 percent nationwide. Lack of internet access is very high in New Orleans, too, at 27.4 percent.
Sreekar Jasthi is a data analyst at NerdWallet the 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 households that are not banked nationwide and in each state We used information from the . To decide which metropolitan regions to study, we first chose the 25 areas in the FDIC report with 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 in each state and metropolitan area are also derived from the FDIC report.
Charges that are incurred when you’re not a banker
We found a price range of $196.50 up to $488.89 in charges for an average unbanked household by adding in the fees associated with cash checking, money orders and prepaid debit cards. The cost of these fees will depend on the extent to which the households’ debit cards are prepaid and permit direct deposit.
To determine the check-cashing costs for unbanked households using debit cards that do not require direct deposit, and for households that only use cash we assumed two pay checks that were cashed each month, and a cost of 1% of the check’s total value. For households using debit cards that are prepaid and have direct deposit we accounted for the cashing of checks at a cost of zero. For both household types, we assumed one money payment per month, with an average cost of $1.40.
To determine the average check cashing and money order fees, we used FDIC’s information on how often alternative financial services use by kind of household (banked or unbanked) and then added the less frequent use by households that are banked to the cost average.
To determine the average annual cost of prepaid debit cards We examined 69 cards that were based on major issuers, high-traffic search volume, Pew Charitable Trust’s and the card offerings listed on the websites of’s and. For cards with several plans we considered every plan as a distinct card.
The report covers the annual cost of an prepaid debit card and without direct deposit for payroll. The median monthly cost used was $4.98, and the median out-of-network ATM fee used was $2.50. We used the maximum fee for cash loading of $4.95.
Without direct deposit, we assumed 12 monthly fees and four ATM fees per month and the two fees for cash loading each month. PIN- and signature-based purchase transaction fees typically don’t apply to cards that have monthly fees, so we omitted them.
Upcoming FDIC survey
A recent preview of the survey for the year 2015 FDIC National Survey of the Unbanked as well as Underbanked Households, scheduled to be released in full on October. 20th It showed that the rate of unbanked households is now 7.7%, which is around 8.6 million household. NerdWallet’s analysis is based on the most current set of data available.
Author bios: Laura McMullen writes about managing money for NerdWallet. Her writing has been featured in The Associated Press, The New York Times, The Washington Post, and other outlets.
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