States in the United States and 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 and news Laura McMullen assigns and edits the financial news content. Her previous position was as a top journalist at NerdWallet and covered budgeting, saving and making money; she has also written for the «Millennial Money» column of The Associated Press. Prior to making the move to NerdWallet as of the year 2015 Laura was employed by U.S. News & World Report, where she edited and wrote content related to health, careers and education and also contributed to the company’s rankings projects. Prior to 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 lives in Washington, D.C.
Sep 28 September 28, 2016
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The benefits of the local bank extend beyond complimentary coffee and chocolateThey offer things that you might consider to be a given, such as free check cashing and loans with reasonable interest rates. But for the more than 9.5 million unbanked households within the U.S., these services are expensive, one that NerdWallet discovered can add hundreds of dollars every year.
In the U.S., 7.7% of households had no members with a bank account in the latest FDIC Nationwide Survey of Unbanked and Underbanked Households, the most current set of information available. It was a decrease from the 2011 version of the FDIC’s Federal Deposit Insurance Corp.’s biannual survey, and the figure decreased to 7% by 2015, as per a preview of the latest edition, which will be available in October.
Benefits not used, additional fees
While fewer families are avoiding financial institutions, those who do are missing out on the opportunity to save up for emergencies, and secured credit cards that can aid in building credit. They aren’t able to benefit from the full array of fraud protections that federally insured banks as well as credit unions have as well as access to online or mobile banking tools which can save the time as well as money. (Read NerdWallet’s national coverage on the to learn more about the options available to unbanked consumers, like .)
households that do not have an account with a bank also have to incur a lot of charges to costly alternative financial service providers. NerdWallet calculated the costs of money order, check cashing, and debit cards that are prepaid. The households with no bank accounts that have a prepaid debit card that allows direct deposit pay an annual average for $196.50 in fees, while unbanked households that make use of a prepaid debit cards with no direct deposit have an annual average of $488.89 in fees. (See our full methodology for more details.)
Unbanked households in the metro and state
We looked at the $196.50 in addition to the $488.89 figures as percentages of each state’s 2013 median income for households that don’t have accounts with banks, based on FDIC data. Look at the map below to discover the states where households that aren’t banked are hit the hardest by fees using both the higher ($488.89) and lower ($196.50) estimations. You can also find out where the states with the greatest number of households that do not have a bank account.
The tables below show the percentage of unbanked households in 22 metropolitan areas , and across all states, plus Washington, D.C. We calculated the cost of not having an account with a bank by dividing it into the household income of households that are not banked in that 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 ARE FINANCED BY THE
The Rank (most to least)
State
Percentage of all households that are not banked
Income of a household that is not banked
Total unbanked expenses for all households (lower estimate)
Total unbanked costs of all household 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%
Key lessons to take away
1. The proportion of households that are not banked is significantly higher for low-income households. Nationally, 7.7% of households did not have a bank account in 2013, however, that rate was noticeably higher for households with low incomes. About 20% of households with incomes of less than $30,000 had no bank accounts, and 24% were underbanked that is, they have at least one savings account or but had used at least one alternative financial service in the past year. These types of services include check cashing as well as money orders and payday loans. More than one third (35.6%) of households that were not banked for the FDIC report stated that the primary reason for not having an account was that they didn’t have enough funds to maintain an account or meet the minimum balance. (Note that many don’t require minimal balances.) Some of the most common reasons are dislike or distrust of banks and high or unpredictable account fees.
The national correlation between unbanked and low-income households translates to the state level. Seven of the 10 states with the highest proportions of nonbanked people are among the 10 states that have one of the highest median family incomes, in the latest U.S. Census American Community Survey. With the exception of Washington, D.C., the nine states with the highest concentration of households without bank accounts had household incomes lower than the median of the 2013 U.S. median of $52,250.
2. The cost of not having a bank account have the greatest impact on households with lower incomes: Income among households without a bank account is particularly low. The average income after tax of unbanked households in the U.S. was $17,359, and was the lowest in Montana at $11,963.
Remember that unbanked households that utilize a prepaid debit card without direct deposit have to pay on average $488.89 in annual fees. 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 income after tax on fuel and motor oil in 2015, according to the U.S. Bureau of Labor Statistics.
The situation in Washington, D.C., the disparity in earnings between unbanked and banked households is staggering. The average 2013 income for fully banked households in D.C. was $55,032, but it was just $14,588 for households without a bank account. That latter number can’t be much more than a few dollars in a city in which housing options for low-income households are declining. According to a D.C. Fiscal Policy report 2013 there were about half the number of Washington apartments renting at less than $880 per month as the 2002. The report states that «subsidized housing is now the only source of inexpensive housing.»
3. The local unbanked population reflects national trends: According to the FDIC 1/5th of black households (20.5%) in the U.S. in 2013 were unbanked, followed by Hispanic (17.9%) and American Indian/Alaskan households (16.9 percent). Only 2.2% of Asian households had no bank accounts This was a smaller proportion than that of white (3.6%) and Pacific Islander/Hawaiian (6.1 percentage) households.
A lot of the areas with the highest percentage of unbanked households are in line with these national demographics. In No. 12, Tennessee as well as No. 2 Louisiana, each state’s biggest city has a majority of black households and the largest cities are Memphis at 63 percent while New Orleans at 59.8%. Phoenix, which tops our list of metros that are not banked, has a large Hispanic population and Albuquerque which is the largest town within New Mexico, which tied with seventh place among states. Two states with the highest percentages of unbanked populations, New Mexico and Oklahoma both have American Indian populations nearly 10 times the size of 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 branches in the area you reside. More than half of ZIP code in the middle of South region are «bank deserts,» which means they’ve got just one or zero bank branches, according to the MS-based Hope Policy Institute, which analyzes financial inclusion. According to the study of the Hope Policy Institute, the mid-South comprises Mississippi, Louisiana and Arkansas and has one of the highest percentages of unbanked households. The region also includes the western region of Tennessee where is the home of Memphis which is where nearly one-fifth (19.5%) of households do not have an account with a bank.
Brick-and-mortar locations are more important for customers who cannot connect to banks online. Certain Memphis residents are unable to use both of these methods. According to the U.S. Census Bureau’s 2013 American Community Survey, 27.7% of Memphis households did not have an internet connection, as compared with 21.4% nationwide. The number of people without internet access is high throughout New Orleans, too, with 27.4%.
Sreekar Jasthi is a data analyst at NerdWallet, a personal finance website. Email: . Laura McMullen is a staff writer at NerdWallet. Email: . Twitter: .
Methodology
Concentrations of income and unbanked households
To calculate the average income of households that are not banked nationwide and in each state we took data from the . To identify which metro areas to examine, we first chose those 25 from the FDIC report that had the largest 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 metro area are also from this report. FDIC report.
Costs associated with not having a bank account
We arrived at the 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 that are associated with cash checks, money orders and pre-paid debit cards. The cost of these fees depends in part on whether the households’ debit cards that are prepaid permit direct deposit.
To calculate the cost of check cashing for households that are not banked and use prepaid debit cards without direct deposit and unbanked households with cash only we assumed two pay checks that were cashed each month, and a cost of 1% of the check’s total value. For those who use prepaid debit cards with direct deposit, we factored in no cash for checks. For both types of households we assumed one cash order sent per month with an average charge of $1.40.
To determine the average check cashing and money-order fees, we used FDIC’s information regarding the frequency of alternative financing services used by each households of different types (banked or unbanked), then applied the lower frequency of use among banked households to the average costs.
To calculate the average annual cost of prepaid debit cards we evaluated 69 cards based on major issuers, high-traffic search volume as well as Pew Charitable Trust’s the offerings of the cards on ‘s and ‘s websites. For cards with several plans, we counted each plan as a separate card.
The report includes the annual cost of an prepaid debit card direct deposit and without direct deposit for payroll. The median monthly fee used was $4.98 and the median out-of-network ATM fee was $2.50. We utilized the maximum cash loading fee of $4.95.
With no the direct deposit option, we assumed 12 monthly charges as well as four ATM fees per month , and the two fees for cash loading per month. Signature- and PIN-based transaction fees aren’t usually applicable to cards that have 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 go public in full on October. 20, 2016, revealed that the number of households without a bank account dropped to 7percent, which is about 8.6 million household. The analysis of NerdWallet is based on the most recent full set of data available.
Author bios: Laura McMullen writes about managing money for NerdWallet. Her work has appeared on The Associated Press, The New York Times, The Washington Post as well as other publications.
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