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States in the United States and 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 Financial, personal finance information Laura McMullen assigns and edits the financial news content. Laura was previously the senior writer for NerdWallet and was responsible for budgeting, saving and making money. She has also written for the “Millennial Financial” column in The Associated Press. Before joining NerdWallet as of the year 2015 Laura was employed by U.S. News & World Report which is where she created and edited articles on health, careers and education and also worked on the rankings of the company. Before working at U.S. News & World Report, Laura interned at Vice Media and studied journalism as well as the history of Arabic at Ohio University. Laura currently lives in Washington, D.C.

Sep 28 September 28, 2016

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The benefits at your local bank go beyond complimentary coffee and chocolate- they include things you may take for granted for example, free check cashing and loans that offer reasonable rates of interest. However, for over 9.5 million households that are not banked across the U.S., these services have a steep cost which NerdWallet discovered adds up to hundreds of dollars every year.

Within the U.S., 7.7% of households didn’t have any members with a bank account as per the 2013 FDIC National Survey of Unbanked and Underbanked Households, the most current set of data available. It was a decrease from the 2011 version of FDIC’s Federal Deposit Insurance Corp.’s biannual survey, and the figure dropped to 7% in 2015, according to an overview of the most recent editionthat 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 save up for emergencies, and secured credit cards which can help build credit. They aren’t able to benefit from the full array of protections against fraud offered by federally insured banks and credit unions offer, and they can’t access online and mobile banking tools which can save time and money. (Read NerdWallet’s national coverage on the topic to find out more about the options available to unbanked consumers, like .)

Families without accounts with banks also incur a lot of charges 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 allows direct deposit can pay an average annual amount for $196.50 in fees. In contrast, unbanked households that utilize a prepaid debit card without direct deposit pay an average annual amount of $488.89 in fees. (See our full methodology for more information.)

Unbanked households by metropolitan and state

We examined both the $196.50 and $488.89 figures as percentages of each state’s 2013 median income for households that do not have accounts with banks, using FDIC data. Explore on the below map, to find the states where households that aren’t banked are most severely impacted by the cost of fees using both the more expensive ($488.89) and lower ($196.50) estimations. You can also see what states are home to the largest number of households without a bank account.

The tables below show the percentage of households without a bank account in the 22 metro regions and across all states and Washington, D.C. We calculated the cost of not having accounts with banks in percentages of the household income of households that are not banked in the 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 HOMEHOLDS BY STATE

Rank (most to least unbanked)

State

Percentage of all households that are unbanked

The average household income is unbanked and non-banked.

Total unbanked costs for all households (lower estimate)

Total unbanked expenses of all household families (higher estimate)

Costs of unbanked expenses as a 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%

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 higher for households with low incomes. Around twenty percent of the households that had incomes below $30,000 had no bank accounts, and 24% were not banked that is, they have at least one savings account or but had used at least one alternative financial service during the previous year. These kinds of services include check cashing or money orders, as well as payday loans. More than three-quarters (35.6%) of households that were not banked for the FDIC report indicated that the primary reason they didn’t have an account was because they don’t have enough money to fund an account or meet the required minimum balance. (Note that a lot of households don’t need the minimum amount of balance.) Other reasons that are common include distaste or distrust for banks, and the high or unpredictability of charges for account accounts.

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 nonbanked individuals are among the states that have one of the highest median family incomes in the latest U.S. Census American Community Survey. In fact, excepting Washington, D.C., the nine states with the highest proportion of households without bank accounts had incomes for households lower than the median of the 2013 U.S. median of $52,250.

2. The cost of not having a bank account are particularly affecting households with low incomes households: The income of households without an account with a bank is especially low. The 2013 average post-tax income of unbanked households within the U.S. was $17,359, and was the lowest in Montana at $11,963.

Be aware that households without bank accounts that utilize a prepaid debit card that does not direct deposit, have to pay the equivalent of $488.89 in fees per year. In Montana the amount would be more than 4% of the 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% of its post-tax income on gas or motor oil during 2015, as per the U.S. Bureau of Labor Statistics.

In Washington, D.C., the difference in earnings between households with bank accounts and those without is vast. The average 2013 income for households that had a bank account D.C. was $55,032, however, it was only $14,588 for households that didn’t have 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 diminishing. According to an D.C. Fiscal Policy report, in 2013, there were roughly half as many Washington apartment rentals at less than $880 per month than they had in 2002. The report states that “subsidized housing is now the only source of inexpensive housing.”

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

Many of the places with the highest proportion of households that are not banked are in line with these national demographics. In No. 12 Tennessee in addition to No. 2 Louisiana, the state’s largest city, has a high percentage of black households in both cities, with Memphis at 63 percent as well as New Orleans at 59.8%. Phoenix, which tops our list of unbanked metros is home to a substantial Hispanic community and Albuquerque which is the biggest city located in New Mexico, which tied with the seventh largest state. Two states with the highest proportions of populations that aren’t banked, New Mexico and Oklahoma both have American Indian populations nearly 10 times higher than that of the U.S. as a whole.

4. Limited access to in-person and online banking can be a hindrance it’s difficult to open a bank account when there are no branches where you reside. More than half the ZIP codes in the mid-South region are “bank deserts” which means they’ve got just one or zero banks, as per the Mississippi-based Hope Policy Institute, which examines the financial inclusion. According to the study of the Hope Policy Institute, the mid-South comprises Mississippi, Louisiana and Arkansas where there are some of the highest rates of unbanked households. The region also includes the western region of Tennessee, home to Memphis which is where more than one-fifth (19.5%) of households don’t have a bank account.

Brick-and-mortar locations are more important for customers who cannot connect to banks online. A few Memphis residents face hurdles to 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 access to the internet, compared with 21.4 percent across the country. The number of people without internet access is a major issue across New Orleans, too, at 27.4 percent.

Sreekar Jasthi is a data analyst at NerdWallet the personal finance website. Email: . Laura McMullen is a staff writer at NerdWallet. Email: . Twitter: .

Methodology

Income and concentrations of households that are not banked

To determine the median income of households that are not banked nationwide and across all states We took information from the . To identify which metro areas to examine We first picked those 25 from 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 with no bank accounts in each state and metropolitan region are also taken from the FDIC report.

Charges that are incurred when you’re not a banker

We found a price range from $196.50 up to $488.89 in fees for the typical household that is not banked, by adding the fees related to cash checking as well as money orders and pre-paid debit cards. The cost of these fees depends in part on whether these households’ prepaid debit cards permit direct deposit.

To determine the check-cashing costs for households that are not banked and use prepaid debit cards without direct deposit or for those using only cash we assumed two pay checks that were cashed each month, and a cost that is 1% of a check’s value. For those who use debit cards that are prepaid and have direct deposit, we accounted for no cash for checks. For both household types we assumed one cash order sent per month with 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 financing services used by each type of household (banked or unbanked) and then applied the lower frequency of use by households that are banked to the average cost.

In order to calculate the annual average cost of prepaid debit cards We looked at 69 cards, that were based on major issuers, search volume as well as Pew Charitable Trust’s the offerings of the cards on the websites of’s and. If cards have different plans, we counted each plan as an individual card.

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

With no direct deposit, we assumed 12 monthly charges, four ATM fees per month and two cash loading fees each month. Signature-based and PIN-based purchase transaction fees aren’t usually applicable to cards with monthly fees, which is why we omitted them.

Upcoming FDIC survey

A preview of the 2015. FDIC National Survey of Unbanked and Underbanked Households, set for release in its entirety on Oct. 20th It revealed that the number of households without a bank account dropped to 7%, or about 8.6 millions of households. NerdWallet’s analysis is based upon the most recent full set of information 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, and other outlets.

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