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 Financial, personal finance news Laura McMullen assigns and edits the financial news content. Her previous position was as a top writer at NerdWallet and was responsible for the process of saving, budgeting and making money. She was also a contributor to “Millennial Financial” column in The Associated Press. Before joining NerdWallet in 2015, Laura was employed by U.S. News & World Report in which she created and edited articles on careers, wellness and education as well as contributed to the rankings of the company. Prior to joining U.S. News & World Report, Laura interned at Vice Media and studied journalism as well as the history of Arabic at Ohio University. Laura is a resident of Washington, D.C.
Sep 28 Sep 28, 2016
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The benefits of your bank aren’t limited to the free coffee and sweets -They offer things that you may take for granted like cashing your checks at no cost and loans with reasonable interest rates. However, for the more than 9.5 million people who aren’t banked within the U.S., these services have a steep cost and one that NerdWallet discovered adds up to hundreds of dollars per year.
In the U.S., 7.7% of households did not have a member with a bank account, as per the 2013 FDIC Nationwide Survey of Bankrupt and Underbanked Households, the most current set of information available. That was down from the 2011 edition of the Federal Deposit Insurance Corp.’s biannual survey, and the figure dropped to 7% in 2015, as per an overview of the most recent version, due to be available in October.
Missed benefits, added fees
While fewer families are avoiding 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 aren’t able to benefit from the entire array of protections against fraud that federally insured banks as well as credit unions have as well as access to the online and mobile banking options that could save them time and money. (Read NerdWallet’s comprehensive coverage of national banks on the to learn more about options for unbanked customers, such as .)
Households that don’t have accounts with banks also incur a lot of charges to financial-service providers that are expensive alternatives. NerdWallet has compiled the cost of money orders, check cashing and prepaid debit cards. Unbanked households that use a prepaid debit card that allows direct deposit can pay an average annual amount of $196.50 in fees. On the other hand, unbanked households that utilize a prepaid debit card with no direct deposit have an annual average of $488.89 in charges. (See our full methodology for more information.)
Unbanked households are reported by metropolitan and state
We looked at both the $196.50 in addition to the $488.89 figures as percentages of each state’s average 2013 income for households that don’t have a bank account that are using FDIC data. Look at this map to find the states where unbanked households are most severely impacted with fees using both the more expensive ($488.89) and the lower ($196.50) figures. You can also find out what states are home to the largest percentage of households that do not have a bank account.
The tables below show the proportion of households that are not banked in 22 metropolitan regions and across all states, plus Washington, D.C. We determined that the price of not owning an account with a bank as a percentage of the household income of households that are not banked in the 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.
Unbanked households by metro area
UNBANKED HOUSEHOLDS BY state
The Rank (most to least)
State
Percentage of all households that aren’t banked
The average household income is unbanked and non-banked.
Total unbanked costs to all families (lower estimate)
Total unbanked cost for all homes (higher estimate)
Average unbanked costs as percent of income (using higher estimate)
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 key
1. The proportion of households that are not banked is significantly higher for low-income households. Nationally, 7.7% of households had no bank accounts in 2013, but this rate was significantly higher among low-income households. About twenty percent of the households with incomes of less than $30,000 had no bank accounts, and 24% were underbanked which means they had more than one saving account or but had utilized at least one other financial service during the previous year. These kinds of services include cashing checks as well as money orders and payday loans. More than three-quarters (35.6%) of households that were not banked for the FDIC report said the main reason for not having an account is that they didn’t have enough funds to keep in an account, or to maintain the minimum balance. (Note that many do not require the minimum amount of balance.) Some of the most common reasons are the distrust or dislike of banks, and the high or unpredictability of fees for accounts.
The national correlation between unbanked and low-income households can be seen at the state-level. Seven of the 10 states with the highest proportions of unbanked people are among the states with 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 concentration of unbanked households had incomes for households 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 households: The income of households without an account with a bank is especially small. The 2013 median post-tax income of unbanked households in the U.S. was $17,359, and was the lowest in Montana at $11,963.
Be aware that households without bank accounts that make use of a prepaid debit cards with no direct deposit have to are charged on average $488.89 in fees per year. In Montana, that would consume up to 4 percent of the average unbanked household’s income. To give you a sense of scale, the average U.S. household spent about 3.5 percent of their income after tax on fuel and motor oil in the year 2015 as per the U.S. Bureau of Labor Statistics.
In Washington, D.C., the disparity in earnings between households with bank accounts and those without is vast. The average income in 2013 for fully banked households in D.C. was $55,032, however, it was only $14,588 for households that didn’t have an account with a bank. The latter figure doesn’t go far in a place where housing options for those with low incomes are diminishing. According to the D.C. Fiscal Policy report 2013 there were only half as many Washington apartment rentals for less than $800 a month than the 2002. The report states that “subsidized housing is now virtually the only source of inexpensive housing.”
3. Local unbanked demographics reflect national trends: According to the FDIC, one-fifth of households with black names (20.5 percent) in the U.S. in 2013 were unbanked, followed closely by Hispanic (17.9%) and American Indian/Alaskan households (16.9%). Just 2.2 percent of Asian households had no bank accounts, which was a lower percentage than white (3.6 percent) and Pacific Islander/Hawaiian (6.1%) households.
A lot of the areas with the highest proportion of households without bank accounts are in line with these national demographics. In No. 12, Tennessee in addition to No. 2 Louisiana the largest state city has a majority of black households and the largest cities are Memphis at 63 percent as well as New Orleans at 59.8%. Phoenix is the top city on our list of unbanked metros, has a large Hispanic population, as does Albuquerque, the largest metropolis located in New Mexico, which tied with seventh place among states. Two states with the highest percentages of people who are not banked, New Mexico and Oklahoma both have American Indian populations nearly 10 times higher than those in the U.S. as a whole.
4. Access to only 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 of ZIP codes in the mid-South region are “bank deserts,” that is, they’ve the same or fewer banks, as per the MS-based Hope Policy Institute, which analyzes financial inclusion. The analysis of the institute shows that the mid-South includes Mississippi, Louisiana and Arkansas and has one of the highest percentages of unbanked households. This region includes the western region of Tennessee, home to Memphis in which nearly one-fifth (19.5 percent) of households don’t have accounts with banks.
Brick-and-mortar locations are more crucial for those who are unable to connect to financial institutions via the internet. Certain Memphis residents face hurdles to both methods. As per the U.S. Census Bureau’s 2013 American Community Survey, 27.7% of Memphis households did not have an internet connection, compared with 21.4 percent nationwide. Lack of internet access is very high across New Orleans, too, with 27.4 percent.
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 of households that are not banked nationwide and across each state we took data from the . To identify which metro areas to analyze We first picked the 25 in the FDIC report with 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.
Figures for the percentage of households with no bank accounts in each state and metropolitan region are also taken from FDIC’s report. FDIC report.
Costs associated with not having a bank account
We found a price range between $196.50 to $488.89 in fees for the average household without a bank account by adding the fees 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 households’ debit cards that are prepaid allow direct deposit.
To calculate the cost of check cashing for non-banked households with debit cards that do not require direct deposit and unbanked households that only use cash We assumed two checks cashable per month and a cost of 1% of the check’s value. For those who use prepaid debit cards with direct deposit option, we factored in no cash for checks. For both household types we assumed one cash order sent per month with an average fee of $1.40.
To determine the average cashing of checks and money order fees, we used FDIC’s data on how often alternative financing services used by each kind of household (banked or not), 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 looked at 69 cards, that were based on the major issuers, their high-traffic searches volume, Pew Charitable Trust’s and the cards listed on the websites of’s and. If cards have several plans We counted every plan as a distinct card.
The study covers the annual cost of an prepaid debit card and without direct deposit for payroll. The median monthly cost used was $4.98 and the median out-of-network ATM fee used was $2.50. We utilized the maximum fee for cash loading of $4.95.
With no the direct deposit option, we had twelve monthly fees, four ATM fees per month , and the two fees for cash loading each month. PIN- and signature-based purchase transaction fees typically don’t apply to cards that have monthly charges, so we didn’t include them.
Upcoming FDIC survey
A preview of the survey for the year 2015 FDIC National Survey of Unbanked as well as Underbanked Households, which is scheduled for release in its entirety on Oct. 20, 2016, revealed that the unbanked rate dropped to 7percent, which is about 8.6 million households. NerdWallet’s analysis is based upon the most up-to-date set of data available.
About the author: Laura McMullen writes about managing the money of NerdWallet. Her writing has been featured in The Associated Press, The New York Times, The Washington Post, and other outlets.
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