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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

The author is Laura McMullen Assistant Assigning Editor Personal finance, financial information Laura McMullen assigns and edits financial news articles and content. Her previous position was as a top writer at NerdWallet and wrote about budgeting, saving and making money; she also contributed to the “Millennial money” column in The Associated Press. Prior to becoming a part of NerdWallet in 2015, Laura had worked at U.S. News & World Report, where she edited and wrote content related to the health and wellness of students, careers and other topics as well as contributed to the company’s ranking projects. Before joining U.S. News & World Report, Laura interned at Vice Media and studied journalism as well as the history of Arabic at Ohio University. Laura is a resident of 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 may take for granted like cashing checks for free and loans with reasonable interest rates. However, for over 9.5 million unbanked households across the U.S., these services are expensive and one that NerdWallet found adds up to hundreds of dollars every year.

The U.S., 7.7% of households had no members who had a bank account in the latest FDIC national survey of Unbanked and Underbanked households, the most current collection of data available. That was down from the 2011 version of Federal Deposit Insurance Corp.’s biannual survey, and the number fell to 7% in 2015, as per an early preview of the new version, due to be released in October.

Additional fees, missed benefits

Although fewer families are forgoing financial institutions, those who are miss out on opportunities to create emergency funds, as well as secured credit cards that help build credit. They’re not able to take advantage of the full range of security against fraud 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 customers, such as .)

Households that don’t have an account with a bank also have to have to pay a lot of fees to financial-service providers that are expensive alternatives. NerdWallet tallied the costs of money checks, cashing orders and debit cards that are prepaid. Unbanked households that use an prepaid debit card that allows direct deposit can pay an annual average for $196.50 in fees. On the other hand, those who are not banked and utilize a prepaid debit card with no direct deposit have an annual average of $488.89 in charges. (See our full methodology for more information.)

Unbanked households in the metropolitan and state

We examined both the $196.50 as well as the $488.89 figures in percentages of the state’s average 2013 income for households that don’t have accounts with banks that are based on FDIC data. Look at on the below map, to discover the states where households that aren’t banked are most severely impacted with fees using both the more expensive ($488.89) and the lower ($196.50) estimations. You can also see which states have the highest percentage of households that do not have a bank account.

The table below shows the proportion of households that are not banked in the 22 metro areas , and across all states plus Washington, D.C. We calculated the cost of not having a bank account as a percentage of 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 BY state

The Rank (most to least)

State

A percentage of households are not banked

Average unbanked household income

Total unbanked costs for all households (lower estimate)

Total unbanked cost for all families (higher estimate)

Average unbanked costs as percentage of income (using more precise estimates)

Mississippi

14.5%

$15,394.41

$31.08 million

$79.82 million

3.18%

Louisiana

13.9%

$20,104.15

$47.26 million

$121.37 million

2.43%

Arizona

12.8%

$20,300.92

$61.95 million

$159.07 million

2.41%

Arkansas

12.3%

$15,653.75

$29.08 million

$74.68 million

3.12%

District of Columbia

11.8%

$14,588.29

$7.46 million

$19.15 million

3.35%

West Virginia

11.0%

$18,592.82

$16.56 million

$42.54 million

2.63%

New Mexico

10.9%

$18,934.67

$17.78 million

$45.67 million

2.58%

Georgia

10.9%

$18,957.70

$81.64 million

$209.64 million

2.58%

Oklahoma

10.9%

$19,373.49

$32.56 million

$83.61 million

2.52%

South Carolina

10.5%

$19,724.50

$38.88 million

$99.84 million

2.48%

Texas

10.4%

$20,621.80

$191.63 million

$492.07 million

2.37%

Kentucky

9.7%

$15,417.32

$34.05 million

$87.45 million

3.17%

Tennessee

9.7%

$17,204.81

$48.51 million

$124.58 million

2.84%

Alabama

9.2%

$18,787.70

$36.03 million

$92.52 million

2.60%

Missouri

8.9%

$20,058.95

$42.11 million

$108.12 million

2.44%

New York

8.5%

$16,833.40

$125.19 million

$321.47 million

2.90%

North Carolina

8.4%

$17,177.65

$61.46 million

$157.82 million

2.85%

New Jersey

8.2%

$21,298.78

$51.25 million

$131.61 million

2.30%

California

8.0%

$22,211.31

$206.18 million

$529.45 million

2.20%

Nevada

7.9%

$19,047.68

$17.06 million

$43.80 million

2.57%

Illinois

7.4%

$21,036.78

$71.47 million

$183.53 million

2.32%

Ohio

7.2%

$18,777.16

$65.61 million

$168.47 million

2.60%

Indiana

7.2%

$22,675.18

$36.28 million

$93.17 million

2.16%

Montana

6.6%

$11,963.24

$5.35 million

$13.74 million

4.09%

Virginia

6.5%

$19,340.75

$39.67 million

$101.88 million

2.53%

Colorado

6.4%

$22,159.12

$25.84 million

$66.36 million

2.21%

Rhode Island

6.2%

$18,543.22

$5.12 million

$13.15 million

2.64%

Florida

6.2%

$19,376.05

$95.70 million

$245.73 million

2.52%

Delaware

6.1%

$22,921.16

$4.33 million

$11.12 million

2.13%

Kansas

6.0%

$21,820.97

$13.49 million

$34.64 million

2.24%

Massachusetts

5.8%

$22,086.69

$29.38 million

$75.45 million

2.21%

Nebraska

5.7%

$15,622.98

$8.47 million

$21.76 million

3.13%

Michigan

5.7%

$19,127.41

$42.44 million

$108.99 million

2.56%

Connecticut

5.6%

$21,036.57

$15.37 million

$39.48 million

2.32%

Wyoming

5.6%

$24,067.11

$2.65 million

$6.82 million

2.03%

Idaho

5.4%

$17,444.44

$6.39 million

$16.42 million

2.80%

Pennsylvania

5.2%

$17,820.47

$52.14 million

$133.90 million

2.74%

Wisconsin

4.8%

$16,495.70

$21.75 million

$55.85 million

2.96%

Maryland

4.8%

$24,470.06

$20.81 million

$53.43 million

2.00%

Oregon

4.5%

$16,345.12

$13.62 million

$34.98 million

2.99%

Iowa

4.5%

$18,571.62

$10.83 million

$27.81 million

2.63%

South Dakota

4.2%

$16,040.68

$2.67 million

$6.86 million

3.05%

Washington

4.1%

$17,048.35

$21.07 million

$54.10 million

2.87%

Hawaii

3.8%

$21,096.90

$3.41 million

$8.77 million

2.32%

Minnesota

3.6%

$16,228.27

$14.92 million

$38.31 million

3.01%

Utah

3.3%

$21,617.24

$6.11 million

$15.68 million

2.26%

Vermont

3.1%

$22,553.77

$1.59 million

$4.08 million

2.17%

New Hampshire

2.9%

$26,653.71

$3.00 million

$7.71 million

1.83%

North Dakota

2.8%

$22,645.30

$1.58 million

$4.06 million

2.16%

Maine

2.4%

$14,906.68

$2.57 million

$6.59 million

3.28%

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 among 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 twenty percent of the households with incomes of less than $30,000 were unbanked and 24% were underbanked that is, they have at least one savings account or but 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 a third (35.6 percent) of households that were not banked for the FDIC report said the main reason they don’t have an account was because they didn’t have enough funds to maintain an account or meet a minimum balance. (Note that many do not require minimum balances.) Other common reasons included dislike or distrust of banks, as well as high or unpredictability of fees for accounts.

The national correlation between unbanked and low-income households can be seen at the state-level. Seven of the states with the highest proportions of nonbanked people are among the 10 states that have low median incomes for households, 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 that were not banked had incomes for households below the 2013 U.S. median of $52,250.

2. The costs of being unbanked hit low-income households the hardest households: The income of households who don’t have an account with a bank is especially low. The 2013 median post-tax income of unbanked households across the U.S. was $17,359, and was the lowest in Montana with $11,963.

Be aware that households without bank accounts that make use of a prepaid debit cards without direct deposit pay an average of $488.89 in fees per year. In Montana the amount 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 or motor oil during the year 2015 as per the U.S. Bureau of Labor Statistics.

The situation in Washington, D.C., the disparity in earnings between households with bank accounts and those without is vast. The average income in 2013 for households with a bank account fully in D.C. was $55,032, but that was only $14,588 for households without having a bank account. The latter figure doesn’t be much more than a few dollars in a city where low-income housing opportunities are shrinking. According to the D.C. Fiscal Policy report in 2013, there were roughly half as many Washington apartments renting under $800 per month than there were in 2002. The report states that “subsidized housing is currently the sole source of affordable housing.”

3. Local unbanked demographics reflect the national trend: According to the FDIC 1/5th of households with black names (20.5%) within the U.S. in 2013 were unbanked, followed closely by Hispanic (17.9%) and American Indian/Alaskan households (16.9 percent). Just 2.2% of Asian households had no bank accounts, which was a lower percentage than white (3.6%) and Pacific Islander and Hawaiian (6.1 percentage) households.

A lot of the areas with the highest percentage of households that are not banked mirror these national demographics. In No. twelve Tennessee in addition to No. 2 Louisiana, each state’s biggest city has a majority of black households, with Memphis at 63% and New Orleans at 59.8%. Phoenix is the top city on our list of cities that aren’t banked, has a large Hispanic population as does Albuquerque, the largest metropolis within New Mexico, which tied with seventh place among states. Two states with the highest percentages 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. Access to only in-person and online banking is a problem: It’s hard to open a bank account when there aren’t branches in the area you live. Nearly half of the 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. The analysis of the institute shows that the mid-South comprises Mississippi, Louisiana and Arkansas where there are some of the highest rates of households without a bank account. This region includes western Tennessee, home to Memphis, where almost one-fifth (19.5 percent) of households don’t have accounts with banks.

Brick-and-mortar stores are especially important for consumers who can’t connect to financial institutions online. Some Memphis residents are unable to use both of these methods. According to the U.S. Census Bureau’s 2013 American Community Survey, 27.7 percent of Memphis households didn’t have an internet connection, compared with 21.4 percent nationwide. Lack of internet access is high across New Orleans, too, with 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 all states, we took information from the . To determine which metro regions to study We first picked those 25 from 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.

Figures for the percentage of unbanked households across each state or metro region are also taken from FDIC’s report. FDIC report.

Charges that are incurred when you’re not a banker

We arrived at the price range of $196.50 up to $488.89 in fees for the average household without a bank account when we added the costs related to cash checking, money orders and debit cards that are prepaid. The cost of these fees is contingent on whether the prepaid debit cards permit direct deposit.

To figure out the costs of cashing checks for households that are not banked and use debit cards prepaid without direct deposit or for those that only use cash We assumed two checks cashable per month and a charge of 1% of a check’s total value. For households using debit cards that are prepaid and have direct deposit we added the cashing of checks at a cost of zero. For both types of households, we assumed one money order sent per month with an average fee of $1.40.

To determine the average of check cashing and money-order fees, we used FDIC’s information regarding how often alternative financial services use by kind of household (banked or non-banked), then used the lower frequency of use among banked households to the average costs.

In order to calculate the annual average cost of debit cards that are prepaid, we examined 69 cards that were based on the major issuers, their high-traffic searches volume as well as Pew Charitable Trust’s the card offerings listed on the websites of’s and. For cards with several plans we considered each plan as an individual card.

The report includes the annual cost of a prepaid debit card with and without direct deposit for payroll. The median monthly fee used was $4.98 The median out-of-network ATM cost was $2.50. We utilized the maximum cash loading fee of $4.95.

In the absence of directly depositing, we assumed 12 monthly charges and four ATM fees per month and two cash loading fees per month. Signature- and PIN-based transaction fees typically don’t apply to cards that have monthly charges, so we omitted them.

Upcoming FDIC survey

A recent preview of 2015 FDIC National Survey of Unbanked as well as Underbanked Households, scheduled to be released in all its entirety on Oct. 20th, revealed that the unbanked rate has fallen to 7.7%, which is around 8.6 million households. The analysis of NerdWallet is based on the most up-to-date set of data available.

The author’s bio: Laura McMullen writes about managing money for NerdWallet. Her writing has been featured on The Associated Press, The New York Times, The Washington Post, and other outlets.

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