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States as well as 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. Her previous position was as a top writer for NerdWallet and was responsible for saving, making and budgeting money; she was also a contributor to “Millennial Financial” column of The Associated Press. Before joining NerdWallet at the end of 2015 Laura had worked at U.S. News & World Report, where 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. Prior to joining U.S. News & World Report, Laura interned at Vice Media and studied journalism as well as history and Arabic in the Ohio University. Ohio University. Laura lives in Washington, D.C.

Sep 28 Sep 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, such as cashing your checks at no cost and loans that offer reasonable rates of interest. However, for the over 9.5 million people who aren’t banked across the U.S., these services are expensive which NerdWallet found adds hundreds of dollars per year.

In the U.S., 7.7% of households did not have a member with a bank account, in the latest FDIC National Survey of Unbanked and Underbanked households, the most up-to-date set of data available. This was lower than the 2011 version of the FDIC’s Federal Deposit Insurance Corp.’s biannual survey, and the number fell to 7% in 2015, according to a preview of the latest version, due to be published in October.

Missed benefits, added fees

Although less families are turning away from banks, the ones who do are missing out on , in which they can save up for emergencies, and secured credit cards that can assist in building credit. They’re not able to take advantage of the full range of fraud protections offered by federally insured banks and credit unions have in addition to not having access to the online and mobile banking options that can save them both time and cash. (Read NerdWallet’s national coverage on the topic to find out more about options for unbanked customers, such as .)

Households that don’t have accounts with banks also incur a lot of charges 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 a prepaid debit card that allows direct deposit pay an average annual amount in the amount of $196.50 in fees. In contrast, unbanked households that make use of a prepaid debit cards that does not allow direct deposit pay an average annual amount of $488.89 in charges. (See our complete methodology for more information.)

Unbanked households by metro and state

We examined our $196.50 and $488.89 figures as percentages of each state’s 2013 average income for households that don’t have an account with a bank, using FDIC data. Look at this map to see the states where unbanked households are most severely impacted by the cost of fees, using both the higher ($488.89) as well as the less ($196.50) estimates. It is also possible to see what states are home to the largest proportion of households that do not have a bank account.

The table below shows the proportion of households that are not banked in 22 large metro areas and in all states and Washington, D.C. We calculated that the price of not owning accounts with banks as a percentage of the household income of households that are not banked in that metro area, as determined 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

The percentage of households that are not banked

The average household income is unbanked and non-banked.

Total unbanked costs of all household households (lower estimate)

Total unbanked costs across all families (higher estimate)

Costs of unbanked expenses 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 significantly higher in low-income households. Nationwide, 7.7% of households didn’t have a bank account in 2013, but this rate was significantly higher among low-income households. About twenty percent of the households that had incomes of less than $30,000 were unbanked and 24% were underbanked which means they had more than one saving account or but had employed at least one alternative financial service within the last year. These types of services include cashing checks or money orders, as well as payday loans. More than one third (35.6 percent) of the households without bank accounts surveyed for the FDIC report indicated that the primary reason they don’t have an account was that they didn’t have enough funds to fund an account or to meet the required minimum balance. (Note that a lot of households don’t need minimal balances.) Other reasons that are common include dislike or distrust of banks, and the high or unpredictability of account fees.

The nationwide correlation between unbanked and low-income households is reflected at the state-level. Seven of the 10 states with the highest proportions of unbanked residents are among the 10 states that have one of the highest median family incomes as per the data from 2013’s U.S. Census American Community Survey. Except for Washington, D.C., the nine states with the highest percentage of households without bank accounts had incomes for households below the 2013 U.S. median of $52,250.

2. The cost of not having a bank account have the greatest impact on households with lower incomes as income among 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 lowest in Montana at $11,963.

Remember that unbanked households that use a prepaid debit card with no direct deposit have to pay on average $488.89 in annual fees. In Montana the amount would be up to 4% of the typical household’s income that is unbanked. For context, the typical U.S. household spent about 3.5% of its income after tax on fuel as well as motor oils in the year 2015, as per the U.S. Bureau of Labor Statistics.

The situation in Washington, D.C., the gap in income between households with bank accounts and those without is huge. The average 2013 income for households with a bank account fully in D.C. was $55,032, but it was just $14,588 for households without an account with a bank. The latter figure doesn’t go far in a place where low-income housing opportunities are declining. According to the D.C. Fiscal Policy report, in 2013, there were only half as many Washington homes that were rented for less than $800 per month as they had in 2002. The report suggests “subsidized housing is now the sole source of affordable apartment units.”

3. Unbanked local demographics reflect the national trend: According to the FDIC 1/5th of black households (20.5 percent) across the U.S. in 2013 were unbanked, followed closely by Hispanic (17.9%) along with American Indian/Alaskan families (16.9%). Only 2.2% of Asian households had no bank accounts this was a lower proportion than that of white (3.6%) and Pacific Islander and Hawaiian (6.1%) households.

A lot of the areas with the highest percentage of households that are not banked reflect the national demographics. In No. 12 Tennessee as well as No. 2 Louisiana, each state’s biggest city, has a high percentage of black households and the largest cities are Memphis at 63 percent and New Orleans at 59.8%. Phoenix is the top city on our list of metros that are not banked is home to a substantial Hispanic population and Albuquerque, the largest town within New Mexico, which tied with seventh place among states. Two states with the highest proportions of populations that aren’t banked, New Mexico and Oklahoma, have American Indian populations nearly 10 times higher than the U.S. as a whole.

4. Access to only in-person and online banking hurts it’s difficult to open a bank account when there are no branches where you live. Nearly half of the ZIP code in the middle of South region are “bank deserts” which means they’ve got only one or no banks, as per the Mississippi-based Hope Policy Institute, which examines the financial inclusion. In the institute’s analysis, the mid-South comprises Mississippi, Louisiana and Arkansas and has some of the highest rates of households that are not banked. It also encompasses the western region of Tennessee where is the home of Memphis, where almost one-fifth (19.5%) of households don’t have a bank account.

Brick-and-mortar branches are even more important for consumers who can’t connect to financial institutions via the internet. Certain Memphis residents are unable to use both of these 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 nationwide. Access to internet is a major issue in New Orleans, too, with 27.4%.

Sreekar Jasthi is a data analyst at NerdWallet the 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 determine the median income of unbanked households across the nation and in each state We took information from the . To identify which metro 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.

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

Costs associated with not having a bank account

We came up with a price range of $196.50 between $196.50 and $488.89 in fees for the typical household that is not banked, when we added the costs that are associated with cash checks as well as money orders and debit cards that are prepaid. The cost of these fees is contingent on whether the prepaid debit cards allow 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 pay checks cashed per month and a fee of 1% of the check’s total value. For those who use debit cards that are prepaid and have direct deposit we accounted for $0 for check cashing. For both types of households we assumed one cash order sent per month with an average fee of $1.40.

To determine the average of check cashing and money order fees, we used the FDIC’s data regarding how often alternative financing services use by kind of household (banked or non-banked), then applied the lower frequency of usage among households with bank accounts to the cost average.

To calculate the average annual cost of debit cards with prepaid options we examined 69 cards that were based on the major issuers, their high-traffic searches volume as well as Pew Charitable Trust’s the cards listed on ‘s and ‘s websites. For cards with several plans, we counted each plan as a separate card.

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

Without directly depositing, we assumed 12 monthly fees as well as four ATM fees per month and two cash loading fees per month. Signature-based and PIN-based purchase transaction fees typically don’t apply to cards with monthly fees, so we omitted them.

Upcoming FDIC survey

A preview of the 2015. FDIC National Survey of Unbanked and Underbanked Households, scheduled to be released in its entirety on October. 20, 2016 The survey revealed that the unbanked rate dropped to 7%, or about 8.6 million household. NerdWallet’s analysis is based on the most recent full set of information available.

About the author: Laura McMullen writes about managing money for NerdWallet. Her work has appeared in The Associated Press, The New York Times, The Washington Post and many other outlets.

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