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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

by Laura McMullen Assistant Assigning Editor Personal finance, financial and news Laura McMullen assigns and edits the financial news content. Her previous position was as a top writer for NerdWallet and covered saving, making and budgeting money. She also contributed to the “Millennial Financial” column of The Associated Press. Prior to making the move to NerdWallet at the end of 2015 Laura had worked at U.S. News & World Report which is where she wrote and edited articles on the health and wellness of students, careers and other topics 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 history and 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 might consider to be a given for example, cashing your checks at no cost and loans with reasonable interest rates. However, for more than 9.5 million people who aren’t banked within the U.S., these services are expensive, one that NerdWallet found adds hundreds of dollars every year.

In the U.S., 7.7% of households didn’t have any members with a bank account as per the 2013 FDIC Nationwide Survey of Bankrupt and Underbanked Households, which is the most current set of data available. That was down from the 2011 edition of the Federal Deposit Insurance Corp.’s biannual survey, and the figure decreased to 7% by 2015, according to an overview of the most recent version, due to be released in October.

Missed benefits, added fees

Although fewer families are forgoing financial institutions, those who do are missing out on opportunities to build emergency funds, and secured credit cards that assist in building credit. They’re not able to take advantage of the entire array of fraud protections that federally insured banks and credit unions have as well as access to online or mobile banking tools that could save them both time and cash. (Read NerdWallet’s comprehensive coverage of national banks on the topic to find out more about options for unbanked customers, such as .)

Families without accounts with banks also incur a lot of charges to financial-service providers that are expensive alternatives. NerdWallet calculated the costs of money orders, check cashing and debit cards that are prepaid. The households with no bank accounts that have an prepaid debit card that allows direct deposit can pay an average annual amount of $196.50 in fees. On the other hand, 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 full methodology for more information.)

Unbanked households in the state and metro area

We looked at our $196.50 and $488.89 figures in percentages of the state’s 2013 average income for households that do not have a bank account, according to FDIC data. Look at this map to see the states where unbanked households are hit the hardest with fees using both the higher ($488.89) and lower ($196.50) estimates. It is also possible to see where the states with the greatest number of households that do not have a bank account.

The tables below illustrate the percentage of households without a bank account in the 22 metro regions and across all states plus Washington, D.C. We estimated that the price of not owning accounts with banks in percentages of the household’s income that is unbanked 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.

Unbanked households by metro area

UNBANKED HOUSEHOLDS ARE FINANCED BY THE

The Rank (most to least unbanked)

State

The percentage of households that are not banked

Income of a household that is not banked

Total unbanked costs to all families (lower estimate)

Total unbanked costs across all homes (higher estimate)

Costs unbanked average as a percent of income (using the higher estimate)

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%

Key lessons to take away

1. The rate of unbanked households is disproportionately high among low-income households: Nationally, 7.7% of households had no bank accounts in 2013, however, that rate was noticeably higher among low-income households. About twenty percent of the households with incomes below $30k were not banked, while 24% were underbanked which means they had at least one savings or but utilized at least one other financial service in the past year. These services include check cashing or money orders, as well as payday loans. More than three-quarters (35.6%) of unbanked households surveyed for the FDIC report said the main reason they don’t have an account was that they don’t have enough money to maintain an account or meet the required minimum balance. (Note that many do not require the minimum amount of balance.) Other reasons that are common include distaste or distrust for banks, and the 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 10 states that have the highest percentages of unbanked residents are among the states that have the lowest median household 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 unbanked households had incomes for households less than the 2013 U.S. median of $52,250.

2. The costs of being unbanked have the greatest impact on households with lower incomes: Income among households without a bank account is particularly poor. The average income after tax of households that were not banked across the U.S. was $17,359, and the lowest was in Montana at $11,963.

Keep in mind that households with no bank accounts who utilize a prepaid debit card that does not direct deposit, are charged an average of $488.89 in fees annually. In Montana the amount would be upward of 4 percent of an average income of a household that is not banked. To give you a sense of scale, the average U.S. household spent about 3.5 percent of their post-tax income on gas or motor oil during 2015 according to the U.S. Bureau of Labor Statistics.

For Washington, D.C., the gap in income between banked and unbanked households is huge. The average income in 2013 for fully banked households in D.C. was $55,032, but it was just $14,588 for those without an account with a bank. This figure isn’t going to be much more than a few dollars in a city where housing options for those with low incomes are diminishing. According to an D.C. Fiscal Policy report in 2013, there were only half as many Washington apartments renting for less than $800 a month than the 2002. The report states that “subsidized housing is now the only source for affordable apartment units.”

3. Unbanked local demographics reflect the national trend: According to the FDIC 1/5th of black households (20.5%) across the U.S. in 2013 were unbanked, followed closely by Hispanic (17.9 percent) and American Indian/Alaskan households (16.9 percent). Only 2.2 percent of Asian households were unbanked This was a smaller percentage than white (3.6 percent) and Hawaiian/Pacific Islander (6.1 percentage) households.

A lot of the areas with the highest concentration of households that are not banked mirror these national demographics. In No. 12 Tennessee and No. 2 Louisiana, each state’s biggest city has a majority of black households in both cities, with Memphis at 63% while New Orleans at 59.8%. Phoenix, which tops our list of cities that aren’t banked, has a large Hispanic community and Albuquerque which is the biggest city in New Mexico, which tied with the seventh largest state. Two states that have the highest percentages of people who are not banked, 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. Access to only in-person and online banking is a problem it’s difficult to open a bank account when there aren’t any branches near where you live. More than half of ZIP areas in mid-South are “bank deserts” which means they’ve got only one or no banks, as per the MS-based Hope Policy Institute, which studies financial inclusion. In the institute’s analysis, the mid-South is comprised of Mississippi, Louisiana and Arkansas and has some of the highest proportions of unbanked households. The region also includes the western region of Tennessee which is home to Memphis, where almost one-fifth (19.5 percent) of households don’t have a bank account.

Brick-and-mortar locations are more crucial for those who are unable to connect to financial institutions online. A few Memphis residents are unable to use both options. According to the U.S. Census Bureau’s 2013 American Community Survey, 27.7 percent of Memphis households did not have an internet connection, as compared with 21.4 percent across the country. The number of people without internet access is very high in New Orleans, too, with 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 determine the median income for unbanked households nationwide and in each state We took data from the . To decide which metropolitan areas to analyze we first selected the 25 areas in the FDIC report that had 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.

The percentages 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 interval from $196.50 up to $488.89 in fees for the typical household that is not banked, when we added the costs related to cash checking, money orders and debit cards that are prepaid. The price of these charges is contingent on whether the debit cards are prepaid and permit direct deposit.

To calculate the cost of check cashing for unbanked households using debit cards that do not require direct deposit and unbanked households with cash only, we assumed two paychecks cashed per month and a cost of 1% of the check’s value. For households that use 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 that there would be one money payment 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 information regarding how often alternative financial services utilized by the households of different types (banked or not) and then applied the lower frequency of use by households that are banked to the average cost.

To determine the average annual cost of debit cards that are prepaid we examined 69 cards based on major issuers, search volume including Pew Charitable Trust’s as well as the card offerings listed on ‘s and ‘s websites. For cards with several plans We counted every plan as a distinct card.

The study 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 cost was $2.50. We utilized the maximum cash loading fee of $4.95.

With no directly depositing, we had 12 monthly charges, four ATM fees per month and the two fees for cash loading each month. Signature-based and PIN-based purchase transaction fees typically don’t apply to cards that have monthly fees, so we excluded them.

Upcoming FDIC survey

A recent preview of the 2015 FDIC National Survey of Unbanked as well as Underbanked Households, which is scheduled to go public in all its entirety on October. 20, 2016, revealed that the unbanked rate is now 7%, or about 8.6 millions of households. The analysis of NerdWallet is based on the most up-to-date set of information available.

About the author: Laura McMullen writes about managing the money of NerdWallet. Her work has appeared on The Associated Press, The New York Times, The Washington Post as well as other outlets.

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