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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

by Laura McMullen Assistant Assigning Editor news Laura McMullen assigns and edits financial news articles and content. Laura was previously the senior writer for NerdWallet and was responsible for saving, making and budgeting money; she also contributed to the “Millennial Financial” column for The Associated Press. Prior to making the move to NerdWallet at the end of 2015 Laura was employed by U.S. News & World Report which is where she wrote and edited articles on health, careers and education and also contributed to the company’s rankings projects. 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 September 28, 2016

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The perks at your local bank go beyond the free coffee and sweets -They offer things that you might consider to be a given like cashing checks for free and loans with reasonable interest rates. However, for the greater than 9.5 million households that are not banked within the U.S., these services come with a hefty price and one that NerdWallet discovered adds hundreds of dollars a year.

The U.S., 7.7% of households did not have a member with a bank account as per the 2013 FDIC Nationwide Survey of Unbanked and Underbanked Households, which is the most recent full set of data available. This was lower than the 2011 edition of the FDIC’s Federal Deposit Insurance Corp.’s biannual survey, and it decreased to 7% by 2015, as per an overview of the most recent edition, which will be released in October.

Benefits not used, additional fees

While fewer families are avoiding banks, the ones who are miss out on the opportunity to build emergency funds, and secured credit cards that aid in building credit. They don’t benefit from the full range of protections against fraud that federally insured banks and credit unions offer as well as access to online and mobile banking tools that can save them time and money. (Read NerdWallet’s national coverage on the topic to find out more about alternatives for non-banked consumers, like .)

Families without an account with a bank also have to have to pay a lot of fees to expensive alternative financial-service providers. NerdWallet calculated the costs of money orders, check cashing and debit cards that are prepaid. Unbanked households that use a prepaid debit card that permits direct deposit pay an average annual amount in the amount of $196.50 in fees. On the other hand, unbanked households that use a prepaid debit card without direct deposit pay an average annual amount of $488.89 in charges. (See our complete methodology for more details.)

Unbanked households by metropolitan and state

We examined our $196.50 and $488.89 figures as percentages of each state’s 2013 median income for households that don’t have an account with a bank, based on FDIC data. Explore this map to see the states in which households without a bank account are the most affected with fees using both the higher ($488.89) and the lower ($196.50) estimations. You can also see where the states with the greatest proportion of households without a bank account.

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

Metro area has a large number of households that are unbanked.

UNBANKED HOMEHOLDS BY STATE

Ranking (most to least)

State

Percentage of all households that aren’t banked

Average unbanked household income

Total unbanked cost for all households (lower estimate)

Total unbanked expenses across all families (higher estimate)

Costs unbanked average as a percentage 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 takeaways

1. The rate of unbanked households is particularly high for low-income households. Nationally, 7.7% of households had no bank accounts in 2013, however this rate was significantly higher for households with low incomes. About 20% of households that had incomes below $30,000 had no bank accounts, and 24% were underbanked which means they had minimum one or more savings accounts account or but utilized at least one other financial service during the previous year. These types of services include cashing checks or money orders, as well as payday loans. More than a third (35.6%) of the households without bank accounts surveyed for the FDIC report indicated that the primary reason they didn’t have an account was because they didn’t have enough funds to keep in an account or to meet a minimum balance. (Note that many don’t require minimum balances.) Some of the most common reasons are distaste or distrust for banks, and the high or unpredictability of account fees.

The correlation of the national population between bank-independent and low-income households can be seen at the state-level. Seven of the states with the highest proportions of unbanked residents are among the 10 states with 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 that were not banked had household incomes lower than the 2013 U.S. median of $52,250.

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

Be aware that households without bank accounts that make use of a prepaid debit cards that does not direct deposit, have to pay the equivalent of $488.89 in fees per year. In Montana this would be up to 4 percent of an average income of a household that is not banked. For context, the average U.S. household spent about 3.5 percent of their post-tax earnings on gasoline as well as motor oils in 2015 as per the U.S. Bureau of Labor Statistics.

For Washington, D.C., the difference in earnings between households with bank accounts and those without is staggering. The median income of 2013 for households that had a bank account D.C. was $55,032, but it was just $14,588 for those without an account with a bank. That latter number can’t go far in a place where housing options for those with low incomes are diminishing. According to the D.C. Fiscal Policy report, in 2013, there were about half the number of Washington apartments renting for less than $800 per month as there were in 2002. The report concludes that “subsidized housing is now virtually the sole source of affordable apartments.”

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%) and American Indian/Alaskan households (16.9 percent). The figure was just 2.2% of Asian households were unbanked, which was a lower concentration than for white (3.6 percent) and Pacific Islander and Hawaiian (6.1 percent) households.

A lot of the areas with the highest concentration of households without bank accounts are in line with these national demographics. In No. 12, Tennessee as well as No. 2 Louisiana the largest state city is home to a large percentage of black residents in both cities, with Memphis at 63 percent as well as New Orleans at 59.8%. Phoenix, which tops our list of metros that are not banked is home to a substantial Hispanic population, as does Albuquerque which is the largest city located in New Mexico, which tied for seventh among the states. Two states with the highest proportions of people who are not 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 hurts it’s difficult to create a bank account if there are no branches where you live. More than half of ZIP areas in mid-South region are “bank deserts,” meaning they have just one or zero bank branches, 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 where there are one of the highest percentages of households without a bank account. The region also includes the western region of Tennessee which is home to Memphis in which nearly one-fifth (19.5 percent) of households don’t have an account with a bank.

Brick-and-mortar locations are more important for customers who cannot connect to banks online. A few Memphis residents face hurdles to both methods. According to the U.S. Census Bureau’s 2013 American Community Survey, 27.7% of Memphis households were without access to the internet, compared with 21.4 percent across the country. The number of people without internet access is very high throughout New Orleans, too, at 27.4 percent.

Sreekar Jasthi is a data analyst at NerdWallet, a 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 of unbanked households across the nation and across each state, we utilized data from the . To determine 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 percentages of households that are not banked within each state as well as metropolitan area are also from the FDIC report.

Costs associated with not having a bank account

We came up with a range between $196.50 up to $488.89 in charges for an typical household that is not banked, when we added the costs associated with cash checking or money orders, as well as pre-paid debit cards. The price of these charges depends in part on whether the 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 for households using only cash, we assumed two paychecks cashed per month and a charge that is 1% of a check’s value. For households using debit cards that are prepaid and have direct deposit option, we accounted for the cashing of checks at a cost of zero. For both household types, we assumed one money purchase per month and an average charge of $1.40.

To calculate the average check cashing and money-order fees, we used the FDIC’s information regarding how often alternative financial services utilized by the kind of household (banked or unbanked) and then added the less frequent use among banked households to the average costs.

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

The analysis includes the annual costs of the prepaid debit card that comes with and without direct deposit to pay payroll. The median monthly fee used was $4.98 and the median out-of-network ATM fee was $2.50. We used the maximum fee for cash loading of $4.95.

In the absence of direct deposit, we had 12 monthly fees and four ATM charges per month and 2 cash load fees per month. PIN- and signature-based purchase transaction fees usually don’t apply to cards with monthly charges, so we didn’t include them.

Upcoming FDIC survey

A recent preview of 2015 FDIC National Survey of Unbanked as well as Underbanked Households, which is scheduled for release in full on Oct. 20, 2016 It revealed that the unbanked rate dropped to 7.7%, which is around 8.6 million household. NerdWallet’s analysis is based upon the most current set of information 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 as well as other publications.

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