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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 financial news articles and content. Laura was previously the senior journalist at NerdWallet and was responsible for budgeting, saving and making money; she was also a contributor to “Millennial Money” column in The Associated Press. Prior to joining NerdWallet at the end of 2015 Laura was employed by U.S. News & World Report, where she created and edited content related to careers, wellness and education and also worked on the company’s rankings projects. Before joining U.S. News & World Report, Laura interned at Vice Media and studied journalism, history and Arabic at Ohio University. Laura is a resident of Washington, D.C.

Sep 28, 2016

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The perks at your local bank go beyond free coffee and candy — they include things you might take for granted for example, cashing your checks at no cost and loans with reasonable interest rates. But for the over 9.5 million unbanked households within the U.S., these services have a steep cost and one that NerdWallet discovered adds hundreds of dollars per year.

The U.S., 7.7% of households didn’t have any members with a bank account as per the 2013 FDIC National Survey of Bankrupt and Underbanked Households, which is the most recent full collection of data available. This was lower than the 2011 edition of the FDIC’s Federal Deposit Insurance Corp.’s biannual survey, and it dropped to 7% in 2015, as per a preview of the latest edition, which will be published in October.

Missed benefits, added fees

While fewer families are avoiding banks, the ones who are not taking advantage of , in which they can build emergency funds, and secured credit cards that can assist in building credit. They aren’t able to benefit from the full range of security against fraud that federally insured banks as well as credit unions offer in addition to not having access to the online and mobile banking options which can save the time as well as money. (Read NerdWallet’s comprehensive coverage of national banks on the topic to find out more about the options available to unbanked consumers, including .)

Households that don’t have an account with a bank also have to have to pay a lot of fees to expensive alternative financial-service providers. NerdWallet has compiled the cost of money order, check cashing, and debit cards that are prepaid. Unbanked households that use a prepaid debit card that permits direct deposit pay an annual average in the amount of $196.50 in fees. In contrast, those without banks who use a prepaid debit card without direct deposit pay an average annual amount of $488.89 in charges. (See our complete methodology for more information.)

Unbanked households in the state and metro area

We looked at our $196.50 as well as the $488.89 figures as percentages of each state’s 2013 average income for households that do not have accounts with banks and according to FDIC data. Check out this map to see the states in which households without a bank account are the most affected by the cost of fees using both the higher ($488.89) as well as the less ($196.50) estimates. You can also find out which states have the highest proportion of households without a bank account.

The tables below illustrate the percentage of unbanked households in 22 large metro areas and in all states plus Washington, D.C. We determined costs of having accounts with banks in percentages of the household income of households that are not banked within the 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

Ranking (most to least)

State

The percentage of households that aren’t banked

The average household income is unbanked and non-banked.

Total unbanked cost to all families (lower estimate)

Total unbanked costs of all household households (higher estimate)

Average unbanked costs as percent 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 proportion of households that are not banked is particularly high among low-income households: Nationally, 7.7% of households did not have a bank account in 2013, however, the rate was much more so for low-income households. About 20% of households that had incomes below $30,000 were unbanked and 24% were underbanked which means they had at least one savings or but used at least one alternative financial service in the past year. These kinds of services include check cashing, money orders and payday loans. More than a third (35.6 percent) of households that were not banked for the FDIC report stated that the primary reason they don’t have an account is that they didn’t have enough money to keep in an account or to meet the required minimum balance. (Note that a lot of households don’t need minimum balances.) Other reasons that are common include dislike or distrust of banks, as well as high or unpredictability of account fees.

The nationwide correlation between unbanked and low-income households translates to the state-level. Seven of the states with the highest percentages of unbanked residents are among the states with low median incomes for households, according to the 2013 U.S. Census American Community Survey. Except for Washington, D.C., the nine states with the highest proportion of households without bank accounts had incomes for households lower than the 2013 U.S. median of $52,250.

2. The costs of being unbanked have the greatest impact on households with lower incomes households: The income of households who don’t have a bank account is particularly low. The average income after tax of non-banked 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 without direct deposit are charged an average of $488.89 in annual fees. In Montana this would be upward of 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 income after tax on fuel as well as motor oils in the year 2015 according to the U.S. Bureau of Labor Statistics.

The situation in Washington, D.C., the difference in earnings between banked and unbanked households is vast. The average 2013 income for households with a bank account fully in D.C. was $55,032, however, it was only $14,588 for households that didn’t have having a bank account. That latter number can’t get much further in a country in which housing options for low-income households are declining. According to a D.C. Fiscal Policy report, in 2013, there were roughly half the number of Washington apartments renting at less than $880 per month than the 2002. The report states that “subsidized housing is now virtually the only source of inexpensive apartment units.”

3. Local unbanked demographics reflect national trends: According the FDIC, one-fifth of households with black names (20.5%) in the U.S. in 2013 were unbanked, followed closely by Hispanic (17.9 percent) along with American Indian/Alaskan families (16.9%). The figure was just 2.2 percent of Asian households were unbanked This was a smaller proportion than that of white (3.6%) and Pacific Islander/Hawaiian (6.1 percent) households.

Many of the places with the highest concentration of unbanked households are in line with 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 in both cities, with Memphis at 63 percent and New Orleans at 59.8%. Phoenix is the top city on our list of cities that aren’t banked, has a large Hispanic population as does Albuquerque, the largest city within New Mexico, which tied with the seventh largest state. Two states with the highest percentages 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. Access to only in-person and online banking can be a hindrance it’s difficult to create a bank account if there aren’t branches in the area you live. More than half of ZIP areas in mid-South region are “bank deserts” meaning they have just one or zero branch banks, according to the Mississippi-based Hope Policy Institute, which examines the financial inclusion. According to the study of the Hope Policy Institute, the mid-South is comprised of Mississippi, Louisiana and Arkansas, which have some of the highest rates of households that are not banked. The region also includes western Tennessee where is the home of Memphis which is where almost one-fifth (19.5 percent) of households do not have an account with a bank.

Brick-and-mortar locations are more crucial for those who are unable to connect to banks online. Certain Memphis residents are unable to use both of these methods. According to the U.S. Census Bureau’s 2013 American Community Survey, 27.7% of Memphis households didn’t have an internet connection, compared with 21.4% nationwide. Access to internet is high in New Orleans, too, with 27.4%.

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

Methodology

Concentrations of income and unbanked households

To calculate the median income for unbanked households nationwide and across each state We utilized information from the . To decide which metropolitan areas to examine, we first chose the 25 areas in the FDIC report that contained 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 figures for the percentage of households that are not banked in each state and metropolitan area are also from the FDIC report.

Costs associated with not having a bank account

We came up with a price range between $196.50 between $196.50 and $488.89 in fees for the typical household that is not banked, by adding the fees related to cash checking, money orders and debit cards that are prepaid. The price of these charges depends in part on whether the households’ debit cards are prepaid and 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 that only use cash We assumed two checks cashed per month and a cost of 1% of the check’s total value. For those who use debit cards that are prepaid and have direct deposit option, we added $0 for check cashing. For both household types, we assumed one money purchase per month and an average cost of $1.40.

To calculate the average check cashing and money-order fees, we used the FDIC’s statistics regarding how often alternative financial services use by households of different types (banked or non-banked) and then added the less frequent use among banked households to the cost average.

To calculate 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 that offer several plans We counted each plan as an individual card.

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

With no directly depositing, we had twelve monthly fees as well as four ATM fees per month , and 2 cash load fees per 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 preview of the 2015. FDIC National Survey of Unbanked as well as Underbanked Households, which is scheduled for release in its entirety on October. 20th, 2016, showed that the rate of unbanked households dropped to 7percent, which is about 8.6 millions of households. NerdWallet’s analysis is based on the most current set of data available.

Author bios: Laura McMullen writes about managing the money of NerdWallet. Her work has appeared in The Associated Press, The New York Times, The Washington Post as well as other publications.

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