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 Personal finance, financial and news Laura McMullen assigns and edits financial news content. She was previously a senior writer at NerdWallet and was responsible for budgeting, saving and making money; she also contributed to the “Millennial money” column in The Associated Press. Before joining NerdWallet as of the year 2015 Laura worked for U.S. News & World Report which is where she wrote and edited information on health, careers and education and also worked on 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 at Ohio University. Laura currently lives in Washington, D.C.
Sep 28 September 28, 2016
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The perks at the local bank extend beyond complimentary coffee and chocolatethey offer services 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 people who aren’t banked in the U.S., these services are expensive and one that NerdWallet discovered can add up to hundreds of dollars a year.
Within the U.S., 7.7% of households had no members with a bank account, according to the 2013 FDIC National Survey of Unbanked and Underbanked Households, the most recent full set of data available. That was down from the 2011 version of FDIC’s Federal Deposit Insurance Corp.’s biannual survey, and the number dropped to 7% in 2015, as per an overview of the most recent edition, which will be available in October.
Missed benefits, added fees
While fewer families are avoiding banks, the ones who do are missing out on opportunities to build emergency funds, and secured credit cards that can assist in building credit. They don’t benefit from the entire array of fraud protections that federally insured banks and credit unions offer as well as access to the online and mobile banking options that can save them time and money. (Read NerdWallet’s comprehensive coverage of national banks on the topic to find out more about options for unbanked consumers, like .)
households that do not have an account with a bank also have to have to pay a lot of fees to costly alternative financial service providers. NerdWallet tallied the costs of money orders, check cashing and prepaid debit cards. Households that are not banked and use the prepaid debit card which permits direct deposit pay an annual average of $196.50 in fees, while those without banks who make use of a prepaid debit cards without direct deposit pay an average annual amount of $488.89 in charges. (See our full methodology for more information.)
Unbanked households in the state and metro area
We looked at both the $196.50 and $488.89 figures as percentages of each state’s average 2013 income for households who don’t have an account with a bank that are using FDIC data. Check out the map below to find the states where unbanked households are most severely impacted by fees, using both the higher ($488.89) and the lower ($196.50) figures. It is also possible to see where the states with the greatest percentage of households without a bank account.
The tables below show the percentage of unbanked households in 22 large metro areas and in all states plus Washington, D.C. We estimated that the price of not owning accounts with banks as a percentage of the household’s income that is unbanked in the area according to 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.
Unbanked households by metro area
UNBANKED HOMEHOLDS BY STATE
Rank (most to least)
State
A percentage of households aren’t banked
The average household income is unbanked and non-banked.
Total unbanked costs of all household households (lower estimate)
Total unbanked expenses for all households (higher estimate)
Average unbanked costs as percent of income (using more precise estimates)
1
Mississippi
14.5%
$15,394.41
$31.08 million
$79.82 million
3.18%
2
Louisiana
13.9%
$20,104.15
$47.26 million
$121.37 million
2.43%
3
Arizona
12.8%
$20,300.92
$61.95 million
$159.07 million
2.41%
4
Arkansas
12.3%
$15,653.75
$29.08 million
$74.68 million
3.12%
5
District of Columbia
11.8%
$14,588.29
$7.46 million
$19.15 million
3.35%
6
West Virginia
11.0%
$18,592.82
$16.56 million
$42.54 million
2.63%
7
New Mexico
10.9%
$18,934.67
$17.78 million
$45.67 million
2.58%
7
Georgia
10.9%
$18,957.70
$81.64 million
$209.64 million
2.58%
7
Oklahoma
10.9%
$19,373.49
$32.56 million
$83.61 million
2.52%
10
South Carolina
10.5%
$19,724.50
$38.88 million
$99.84 million
2.48%
11
Texas
10.4%
$20,621.80
$191.63 million
$492.07 million
2.37%
12
Kentucky
9.7%
$15,417.32
$34.05 million
$87.45 million
3.17%
12
Tennessee
9.7%
$17,204.81
$48.51 million
$124.58 million
2.84%
14
Alabama
9.2%
$18,787.70
$36.03 million
$92.52 million
2.60%
15
Missouri
8.9%
$20,058.95
$42.11 million
$108.12 million
2.44%
16
New York
8.5%
$16,833.40
$125.19 million
$321.47 million
2.90%
17
North Carolina
8.4%
$17,177.65
$61.46 million
$157.82 million
2.85%
18
New Jersey
8.2%
$21,298.78
$51.25 million
$131.61 million
2.30%
19
California
8.0%
$22,211.31
$206.18 million
$529.45 million
2.20%
20
Nevada
7.9%
$19,047.68
$17.06 million
$43.80 million
2.57%
21
Illinois
7.4%
$21,036.78
$71.47 million
$183.53 million
2.32%
22
Ohio
7.2%
$18,777.16
$65.61 million
$168.47 million
2.60%
22
Indiana
7.2%
$22,675.18
$36.28 million
$93.17 million
2.16%
24
Montana
6.6%
$11,963.24
$5.35 million
$13.74 million
4.09%
25
Virginia
6.5%
$19,340.75
$39.67 million
$101.88 million
2.53%
26
Colorado
6.4%
$22,159.12
$25.84 million
$66.36 million
2.21%
27
Rhode Island
6.2%
$18,543.22
$5.12 million
$13.15 million
2.64%
27
Florida
6.2%
$19,376.05
$95.70 million
$245.73 million
2.52%
29
Delaware
6.1%
$22,921.16
$4.33 million
$11.12 million
2.13%
30
Kansas
6.0%
$21,820.97
$13.49 million
$34.64 million
2.24%
31
Massachusetts
5.8%
$22,086.69
$29.38 million
$75.45 million
2.21%
32
Nebraska
5.7%
$15,622.98
$8.47 million
$21.76 million
3.13%
32
Michigan
5.7%
$19,127.41
$42.44 million
$108.99 million
2.56%
34
Connecticut
5.6%
$21,036.57
$15.37 million
$39.48 million
2.32%
34
Wyoming
5.6%
$24,067.11
$2.65 million
$6.82 million
2.03%
36
Idaho
5.4%
$17,444.44
$6.39 million
$16.42 million
2.80%
37
Pennsylvania
5.2%
$17,820.47
$52.14 million
$133.90 million
2.74%
38
Wisconsin
4.8%
$16,495.70
$21.75 million
$55.85 million
2.96%
38
Maryland
4.8%
$24,470.06
$20.81 million
$53.43 million
2.00%
40
Oregon
4.5%
$16,345.12
$13.62 million
$34.98 million
2.99%
40
Iowa
4.5%
$18,571.62
$10.83 million
$27.81 million
2.63%
42
South Dakota
4.2%
$16,040.68
$2.67 million
$6.86 million
3.05%
43
Washington
4.1%
$17,048.35
$21.07 million
$54.10 million
2.87%
44
Hawaii
3.8%
$21,096.90
$3.41 million
$8.77 million
2.32%
45
Minnesota
3.6%
$16,228.27
$14.92 million
$38.31 million
3.01%
46
Utah
3.3%
$21,617.24
$6.11 million
$15.68 million
2.26%
47
Vermont
3.1%
$22,553.77
$1.59 million
$4.08 million
2.17%
48
New Hampshire
2.9%
$26,653.71
$3.00 million
$7.71 million
1.83%
49
North Dakota
2.8%
$22,645.30
$1.58 million
$4.06 million
2.16%
50
Maine
2.4%
$14,906.68
$2.57 million
$6.59 million
3.28%
51
Alaska
1.9%
$21,299.66
$1,002,022.57
$2,573,028.07
2.30%
Important lessons to take away
1. The rate of unbanked households is disproportionately high among 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. Around twenty percent of the households that had incomes of less than $30k were not banked, while 24% were underbanked which means they had minimum one or more savings accounts account or but had utilized at least one other financial service within the last year. These kinds of services include cashing checks or money orders, as well as payday loans. More than one third (35.6 percent) of households that were not banked in the FDIC report indicated that the primary reason for not having an account was that they didn’t have enough money to keep in an account or to meet the minimum balance. (Note that many don’t require minimum balances.) Other common reasons included the distrust or dislike of banks and high or unpredictable account fees.
The correlation of the national population between bank-independent and low-income households is reflected at the state-level. Seven of the states with the highest proportions of unbanked people are among the states that have the lowest median household 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 unbanked households were home to households with incomes that were less than the median of the 2013 U.S. median of $52,250.
2. The financial burden of not having a bank hit low-income households the hardest: Income among households without accounts with banks is especially small. The 2013 average post-tax income of unbanked households within the U.S. was $17,359, and the lowest was in Montana with $11,963.
Remember that unbanked households that make use of a prepaid debit cards with no direct deposit have to pay the equivalent of $488.89 in annual fees. In Montana the amount would be upward of 4 percent of the typical household’s income that is unbanked. To give you a sense of scale, the average U.S. household spent about 3.5% of its income after tax on fuel and motor oil in the year 2015 according to 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 vast. The average 2013 income for households with a bank account fully in D.C. was $55,032, but that was only $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 shrinking. According to an D.C. Fiscal Policy report in 2013, there were about half the number of Washington apartment rentals at less than $880 a month than the 2002. The report suggests “subsidized housing is now the only source for affordable apartment units.”
3. Local unbanked demographics reflect national trends: According the FDIC 1/5th of black households (20.5 percent) within 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 percent of Asian households were unbanked this was a lower percentage than white (3.6%) and Hawaiian/Pacific Islander (6.1 percentage) households.
Many of the places with the highest proportion of households without bank accounts mirror these national demographics. In No. 12 Tennessee and No. 2 Louisiana, the state’s largest city, has a high percentage of black households and the largest cities are Memphis at 63% and New Orleans at 59.8%. Phoenix is at the top of our list of unbanked metros with a significant Hispanic community and Albuquerque which is the largest town located in 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, have American Indian populations nearly 10 times that of those in 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 aren’t branches in the area you live. Nearly half of the ZIP code in the middle of South are “bank deserts” meaning they have the same or fewer branch banks, according to the Mississippi-based Hope Policy Institute, which analyzes financial inclusion. According to the study of the Hope Policy Institute, the mid-South is comprised of Mississippi, Louisiana and Arkansas and has some of the highest proportions of households without a bank account. The region also includes the western part of Tennessee, home to Memphis, where nearly one-fifth (19.5%) 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 financial institutions online. Some Memphis residents face hurdles to both methods. Based on the U.S. Census Bureau’s 2013 American Community Survey, 27.7 percent of Memphis households did not have access to the internet, compared with 21.4% nationwide. Lack of internet access is very high in New Orleans, too, at 27.4 percent.
Sreekar Jasthi is a data analyst at NerdWallet which is a personal finance site. Email: . Laura McMullen is a staff writer at NerdWallet. Email: . Twitter: .
Methodology
The income and the concentrations of households that are not banked
To calculate the average income of households that are not banked nationwide and in each state, we took data from the . To identify which metro areas to examine We first picked the 25 areas in the FDIC report with 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.
Figures for the percentage of unbanked households in each state and metro area are also from this report. FDIC report.
Fees associated with being unbanked
We came up with a interval between $196.50 up to $488.89 in charges for an typical household that is not banked, by adding the fees that are associated with cash checks, money orders and debit cards that are prepaid. The cost of these fees depends in part on whether these households’ debit cards that are prepaid allow direct deposit.
To calculate the cost of check cashing for non-banked households with debit cards prepaid without direct deposit, and for households using only cash We assumed two checks cashed per month and a fee that is 1% of a check’s total value. For households using debit cards prepaid with direct deposit option, we added no cash for checks. For both types of households we assumed one cash order sent per month with an average cost of $1.40.
To determine the average check cashing and money order fees, we used the FDIC’s statistics regarding the frequency of alternative financing services use by type of household (banked or non-banked), then added the less frequent usage among households with bank accounts to the cost average.
To determine the average annual cost of debit cards with prepaid options, we evaluated 69 cards that were based on major issuers, search volume including Pew Charitable Trust’s as well as the cards listed on ‘s and ‘s websites. For cards that offer multiple plan options we considered each plan as an individual card.
The analysis includes the annual costs of an prepaid debit card direct deposit and without direct deposit for payroll. The median monthly fee was $4.98 The median out-of-network ATM cost was $2.50. We used the maximum cash loading fee of $4.95.
In the absence of the direct deposit option, we assumed 12 monthly fees and four ATM charges per month and the two fees for cash loading each month. PIN- and signature-based purchase transaction fees aren’t usually applicable to cards with monthly fees, so we excluded them.
Upcoming FDIC survey
A preview of the 2015. FDIC National Survey of the Unbanked and Underbanked Households, set to go public in full on October. 20th The survey revealed that the unbanked rate dropped to 7percent, which is about 8.6 million household. NerdWallet’s analysis is based on the most recent full set of data available.
The author’s bio: Laura McMullen writes about managing the money of NerdWallet. Her work has appeared on The Associated Press, The New York Times, The Washington Post and many other outlets.
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