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 Personal finance, financial news Laura McMullen assigns and edits financial news content. Her previous position was as a top journalist at NerdWallet and wrote about saving, making and budgeting money; she has also written for the «Millennial Financial» column in The Associated Press. Before making the move to NerdWallet in 2015, Laura worked for U.S. News & World Report which is where she created and edited content related to careers, wellness 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, history and 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 at your bank aren’t limited to the free coffee and sweets — they include things you might consider to be a given like free check cashing and loans that offer reasonable rates of interest. But for the over 9.5 million people who aren’t banked in the U.S., these services have a steep cost and one that NerdWallet found adds up to hundreds of dollars per year.
The U.S., 7.7% of households did not have a member with a bank account in the latest FDIC National Survey of Unbanked and Underbanked Households, which is the most up-to-date set of information available. It was a decrease from the 2011 edition of the FDIC’s Federal Deposit Insurance Corp.’s biannual survey, and the figure decreased to 7% by 2015, as per an early preview of the new editionthat will be available in October.
Additional fees, missed benefits
Although less families are turning away from banks, the ones who are miss out on the opportunity to build emergency funds, and secured credit cards which can assist in building credit. They’re not able to take advantage of the full range of fraud protections that federally insured banks as well as credit unions have, and they can’t access online or mobile banking tools that could save them both time and cash. (Read NerdWallet’s national coverage on the subject to learn more about options for unbanked consumers, like .)
households that do not have an account with a bank also have to have to pay a lot of fees to expensive alternative financial-service providers. NerdWallet has compiled the cost of money orders, check cashing and prepaid debit cards. Households that are not banked and use a prepaid debit card that permits direct deposit pay an average annual amount for $196.50 in fees, while those without banks who use a prepaid debit card with no direct deposit have an average annual amount of $488.89 in charges. (See our complete methodology for more information.)
Unbanked households by metro and state
We looked at our $196.50 and $488.89 figures as percentages of each state’s 2013 median income for households that don’t have a bank account and based on FDIC data. Explore 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 see which states have the highest number of households that do not have a bank account.
The tables below show the percentage of households without a bank account in the 22 metro regions and across all states, plus Washington, D.C. We estimated costs of having accounts with banks in percentages of the household’s income that is unbanked within the 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 BY state
The Rank (most to least)
State
The percentage of households that are not banked
Average unbanked household income
Total unbanked cost to all families (lower estimate)
Total unbanked costs of all household 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%
Important takeaways
1. The percentage of households without a bank account is significantly higher for low-income households. Nationally, 7.7% of households didn’t have a bank account in 2013, however, the rate was much higher among low-income households. Around 20percent of families that had incomes below $30,000 were unbanked and 24% of them were unbanked, meaning they had at least one savings or but used at least one alternative financial service during the previous year. These types of services include check cashing, money orders and payday loans. More than three-quarters (35.6 percent) of households that were not banked in the FDIC report stated that the primary reason they don’t have an account is that they didn’t have enough money to maintain an account or meet the minimum balance. (Note that many don’t require the minimum amount of balance.) Other reasons that are common include dislike or distrust of banks, as well as high or unpredictability of account fees.
The national correlation between unbanked and low-income households is reflected at the state level. Seven of the states with the highest proportions of unbanked individuals are among the states that have 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 concentration of households without bank accounts had household incomes 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 households: The income of households that don’t have an account with a bank is especially poor. The 2013 average post-tax income of households that were not banked across the U.S. was $17,359, and was lowest in Montana with $11,963.
Remember that unbanked households that make use of a prepaid debit cards without direct deposit pay an average of $488.89 in annual fees. In Montana, that would consume up to 4% of the typical household’s income that is unbanked. For context, the average U.S. household spent about 3.5% of its post-tax earnings on gasoline as well as motor oils in the year 2015, as per the U.S. Bureau of Labor Statistics.
In Washington, D.C., the gap in income between unbanked and banked households is huge. The average 2013 income for households that had a bank account D.C. was $55,032, but it was just $14,588 for households that didn’t have a bank account. This figure isn’t going to be much more than a few dollars in a city in which housing options for low-income households are declining. According to an D.C. Fiscal Policy report 2013 there were roughly half as many Washington apartment rentals for less than $800 per month than there were in 2002. The report suggests «subsidized housing is currently the sole source of affordable apartments.»
3. Local unbanked demographics reflect national trends: According the FDIC One-fifth of black households (20.5 percent) in the U.S. in 2013 were not banked, followed by Hispanic (17.9%) and American Indian/Alaskan households (16.9%). Just 2.2% of Asian households had no bank accounts, which was a lower percentage than white (3.6 percent) and Pacific Islander/Hawaiian (6.1 percent) households.
Many of the places with the highest concentration of households without bank accounts reflect the national demographics. In No. twelve Tennessee and No. 2 Louisiana, each state’s biggest city, has a high percentage of black residents in both cities, with Memphis at 63% while New Orleans at 59.8%. Phoenix, which tops our list of cities that aren’t banked with a significant Hispanic community and Albuquerque which is the biggest city within New Mexico, which tied for seventh among the states. Two states that have the highest proportions of populations that aren’t banked, New Mexico and Oklahoma, have American Indian populations nearly 10 times the size of the U.S. as a whole.
4. Limited access to in-person and online banking is a problem: It’s hard to create a bank account if there aren’t any branches near where you live. More than half of ZIP code in the middle of South are «bank deserts,» meaning they have only one or no branch banks, according to the MS-based Hope Policy Institute, which studies financial inclusion. In the institute’s analysis, the mid-South includes Mississippi, Louisiana and Arkansas and has some of the highest rates of households without a bank account. This region includes the western part of Tennessee, home to Memphis, where almost one-fifth (19.5%) of households don’t have a bank account.
Brick-and-mortar stores are especially important for consumers who can’t connect to banks 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, compared with 21.4 percent nationwide. The number of people without internet access is high in New Orleans, too, with 27.4%.
Sreekar Jasthi is a data analyst at NerdWallet the personal finance site. Email: . Laura McMullen is a staff writer at NerdWallet. Email: . Twitter: .
Methodology
Income and concentrations of households that are not banked
To calculate the average income for unbanked households nationwide and in each state we took data from the . To determine which metro areas to examine We first picked the 25 areas in the FDIC report with 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 households with no bank accounts in each state and metropolitan area are also derived from FDIC’s report. FDIC report.
Fees associated with being unbanked
We found a interval between $196.50 up to $488.89 in fees for the average unbanked household by adding the fees that are associated with cash checks as well as money orders and debit cards that are prepaid. The price of these charges is contingent on whether the households’ prepaid debit cards allow direct deposit.
To figure out the costs of cashing checks for unbanked households using debit cards prepaid without direct deposit or for those with cash only, we assumed two paychecks that were cashed each month, and a charge of 1% of a check’s total value. For households that use debit cards that are prepaid and have direct deposit, we accounted for $0 for check cashing. For both household types we assumed that there would be one money order sent per month with an average fee of $1.40.
To calculate the average cashing of checks and money order fees, we analyzed the FDIC’s statistics on what frequency alternative financial services utilized by the type of household (banked or unbanked), then used 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 examined 69 cards with the help of major issuers, search volume including Pew Charitable Trust’s as well as the offerings of the cards on ‘s and ‘s websites. For cards that offer multiple plan options We counted every plan as a distinct card.
The report includes the annual cost of an prepaid debit card and without direct deposit to pay payroll. The median monthly cost used was $4.98 and the median out-of-network ATM cost was $2.50. We utilized the maximum cash loading fee of $4.95.
With no direct deposit, we assumed 12 monthly charges as well as four ATM charges per month and 2 cash load fees per month. Signature-based and PIN-based purchase transaction fees usually don’t apply to cards that have monthly fees, which is why we omitted them.
Upcoming FDIC survey
A preview of the survey for the year 2015 FDIC National Survey of the Unbanked and Underbanked Households, set to be released in all its entirety on October. 20th, 2016 The survey showed that the rate of unbanked households dropped to 7percent, which is about 8.6 million households. NerdWallet’s analysis is based on the most recent full 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 as well as other outlets.
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