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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 and news Laura McMullen assigns and edits financial news articles and content. Laura was previously the senior writer at NerdWallet and covered budgeting, saving and making money. She has also written for the “Millennial money” column in The Associated Press. Prior to joining NerdWallet as of the year 2015 Laura had worked at U.S. News & World Report in which she wrote and edited content related to the health and wellness of students, careers and other topics and also contributed to the company’s rankings projects. Before working at 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 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 offer services you may take for granted for example, cashing your checks at no cost and loans with reasonable interest rates. However, for the greater than 9.5 million people who aren’t banked within the U.S., these services come with a hefty price and one that NerdWallet found adds hundreds of dollars a 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 up-to-date collection of data available. It was a decrease 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 editionthat will be published in October.

Additional fees, missed benefits

Although fewer families are forgoing financial institutions, those who are not taking advantage of 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 entire array of fraud protections offered by federally insured banks and credit unions offer as well as access to online or mobile banking tools that can save them both time and cash. (Read NerdWallet’s coverage of the nation on the topic to find out more about options for unbanked customers, such as .)

Families without an account with a bank also have to have to pay a lot of fees to expensive alternative financial-service providers. NerdWallet tallied the costs of money checks, cashing orders and pre-paid debit cards. Households that are not banked and use an prepaid debit card that allows direct deposit can pay an annual average in the amount of $196.50 in fees, while those without banks who make use of a prepaid debit cards with no direct deposit have an average annual amount of $488.89 in fees. (See our complete methodology for more details.)

Unbanked households are reported by metro and state

We examined both the $196.50 in addition to the $488.89 figures in percentages of the state’s 2013 average income for households who don’t have a bank account and using FDIC data. Look at on the below map, to see the states where households that aren’t banked are the most affected by fees, using both the higher ($488.89) as well as the less ($196.50) estimates. You can also see what states are home to the largest percentage of households that do not have a bank account.

The table below shows the proportion of households that are not banked in 22 metropolitan areas , and across all states and Washington, D.C. We determined that the price of not owning a bank account by dividing it into the household’s income that is unbanked 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.

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

UNBANKED HOUSEHOLDS ARE FINANCED BY THE

Ranking (most to least)

State

Percentage of all households that are not banked

The average household income is unbanked and non-banked.

Total unbanked expenses to all families (lower estimate)

Total unbanked costs across all households (higher estimate)

Costs unbanked average as a percentage of income (using 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 percentage of households without a bank account is particularly high for low-income households. Nationally, 7.7% of households had no bank accounts in 2013, however the rate was much more so for low-income households. Nearly 20percent of families that had incomes less than $30k were not banked, while 24% of them were unbanked which means they had more than one saving account or but utilized at least one other financial service during the previous year. These kinds of services include check cashing as well as money orders and payday loans. More than one third (35.6%) of unbanked households surveyed for the FDIC report said the main reason they didn’t have an account was because they didn’t have enough money to keep in an account or meet a minimum balance. (Note that many do not require minimum balances.) Other reasons that are common include the distrust or dislike 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 percentages of unbanked people are among the states that have one of the highest median family incomes, according to the 2013 U.S. Census American Community Survey. With the exception of Washington, D.C., the nine states with the highest proportion of households without bank accounts had household incomes lower than the median of the 2013 U.S. median of $52,250.

2. The financial burden of not having a bank are particularly affecting households with low incomes: Income among households that don’t have a bank account is particularly poor. The 2013 average post-tax income of households that were not banked in the U.S. was $17,359, and was lowest in Montana at $11,963.

Keep in mind that households with no bank accounts who use a prepaid debit card that does not direct deposit, pay on average $488.89 in annual fees. In Montana the amount would be more than 4 percent of the average income of a household that is not banked. For context, the average U.S. household spent about 3.5% of its income after tax on fuel as well as motor oils in the year 2015, according to the U.S. Bureau of Labor Statistics.

In Washington, D.C., the disparity in earnings between unbanked and banked households is huge. The average income in 2013 for households with a bank account fully in D.C. was $55,032, but it was just $14,588 for households that didn’t have a bank account. That latter number can’t go far in a place in which housing options for low-income households are diminishing. According to an D.C. Fiscal Policy report in 2013, there were about half as many Washington apartments renting for less than $800 per month as the 2002. The report concludes that “subsidized housing is now virtually the sole source of affordable housing.”

3. The local unbanked population reflects national trends: According the FDIC One-fifth of black households (20.5 percent) across the U.S. in 2013 were unbanked, followed by Hispanic (17.9 percent) along with American Indian/Alaskan families (16.9%). Only 2.2 percent of Asian households were not banked this was a lower proportion than that of white (3.6%) and Pacific Islander and Hawaiian (6.1 percent) households.

A lot of the areas with the highest proportion of unbanked households mirror these national demographics. In No. 12 Tennessee in addition to No. 2 Louisiana the largest state city is home to a large percentage of black residents, with Memphis at 63% 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 and Albuquerque which is the largest city within New Mexico, which tied with the seventh largest state. Two states that have the highest percentages of populations that aren’t banked, New Mexico and Oklahoma, have American Indian populations nearly 10 times that of that of the U.S. as a whole.

4. Limited access to in-person and online banking hurts: It’s hard to create a bank account if there aren’t any branches near where you live. More than half the ZIP areas in mid-South are “bank deserts,” that is, they’ve just one or zero branch banks, according to the Mississippi-based Hope Policy Institute, which studies financial inclusion. The analysis of the institute shows that the mid-South comprises Mississippi, Louisiana and Arkansas, which have some of the highest proportions of households that are not banked. It also encompasses western Tennessee where is the home of Memphis in which nearly one-fifth (19.5 percent) of households don’t have accounts with banks.

Brick-and-mortar branches are even more crucial for those who are unable to connect to banks online. Some Memphis residents have difficulties with both methods. As per the U.S. Census Bureau’s 2013 American Community Survey, 27.7% of Memphis households were without an internet connection, as compared with 21.4 percent across the country. The number of people without internet access is high throughout New Orleans, too, with 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

Concentrations of income and unbanked households

To calculate the average income of unbanked households across the nation and across each state We took data from the . To decide which metropolitan regions to study we first selected the 25 areas in the FDIC report with the highest 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 across each state or metropolitan area are also derived from the FDIC report.

Charges that are incurred when you’re not a banker

We found a range between $196.50 to $488.89 in fees for the typical household that is not banked, when we added the costs associated with cash checking as well as 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 figure out the costs of cashing checks for non-banked households with debit cards prepaid without direct deposit, and for households using only cash we assumed two pay checks that were cashed each month, and a charge that is 1% of a check’s value. For households using debit cards prepaid with direct deposit we accounted for no cash for checks. For both household types we assumed one cash purchase per month and an average fee of $1.40.

To determine the average cashing of checks and money order fees, we used the FDIC’s statistics on the frequency of alternative financing services use by type of household (banked or not), then added the less frequent use among banked households to the cost average.

To calculate the average annual cost of debit cards with prepaid options We examined 69 cards with the help of major issuers, high-traffic search volume including Pew Charitable Trust’s as well as the offerings of the cards on the websites of’s and. If cards have several plans we considered each plan as an individual card.

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

In the absence of direct deposit, we assumed twelve monthly fees as well as four ATM fees per month , and the two fees for cash loading each month. Signature- and PIN-based transaction fees usually don’t apply to cards that have monthly charges, so we excluded them.

Upcoming FDIC survey

A preview of the survey for the year 2015 FDIC National Survey of the Unbanked as well as Underbanked Households, set to go public in all its entirety on October. 20th, 2016 The survey showed that the rate of unbanked households is now 7%, or about 8.6 million household. NerdWallet’s analysis is based on the most current set of information 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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