States in the United States and Metro Areas With the Most Unbanked Households
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States and Metro Areas With the Most Unbanked Households
The author is Laura McMullen Assistant Assigning Editor information Laura McMullen assigns and edits financial news content. Laura was previously the senior writer at NerdWallet and wrote about budgeting, saving and making money; she was also a contributor to “Millennial Financial” column in The Associated Press. Before making the move to NerdWallet at the end of 2015 Laura had worked at U.S. News & World Report which is where she created and edited articles on careers, wellness and education as well as contributed to the rankings of the company. Before joining U.S. News & World Report, Laura interned at Vice Media and studied journalism, history and Arabic in the Ohio University. Ohio University. Laura is a resident of 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 might consider to be a given, such as free check cashing and loans with reasonable interest rates. However, for greater than 9.5 million unbanked households across the U.S., these services are expensive which NerdWallet found adds hundreds of dollars every 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, which is the most current set of data available. It was a decrease from the 2011 edition of the FDIC’s Federal Deposit Insurance Corp.’s biannual survey, and the figure decreased to 7% by 2015, as per an early preview of the new editionthat will be released in October.
Benefits not used, additional fees
Although fewer families are forgoing financial institutions, those who are not taking advantage of opportunities to save up for emergencies, and secured credit cards that can assist in building 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 that could save them time and money. (Read NerdWallet’s coverage of the nation on the to learn more about the options available to unbanked consumers, like .)
households that do not have an account with a bank also have to incur a lot of charges to expensive alternative financial-service providers. NerdWallet tallied the costs of money order, check cashing, and debit cards that are prepaid. Households that are not banked and use a prepaid debit card that allows direct deposit can pay an average annual amount in the amount of $196.50 in fees. In contrast, those who are not banked and use a prepaid debit card with no direct deposit have an average annual amount of $488.89 in charges. (See our complete methodology for more details.)
Unbanked households by metro and state
We looked at both the $196.50 as well as the $488.89 figures in percentages of the state’s 2013 average income for households that do not have a bank account that are using FDIC data. Explore the map below to find the states where households that aren’t banked are hit the hardest by the cost of fees using both the more expensive ($488.89) and lower ($196.50) figures. You can also find out what states are home to the largest number of households that do not have a bank account.
The tables below illustrate the percentage of unbanked households in 22 metropolitan areas , and across all states and Washington, D.C. We estimated the cost of not having accounts with banks as a percentage of the average unbanked household income within the metro 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
The Rank (most to least)
State
The percentage of households that aren’t banked
Income of a household that is not banked
Total unbanked cost for all households (lower estimate)
Total unbanked costs for all households (higher estimate)
Costs of unbanked expenses as a percentage 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%
Key takeaways
1. The proportion of households that are not banked is significantly higher in low-income households. Nationwide, 7.7% of households had no bank accounts in 2013, however, that rate was noticeably higher for households with low incomes. Nearly twenty percent of the households that had incomes less than $30k were not banked, while 24% were not banked which means they had more than one saving account account or but had employed at least one alternative financial service within the last year. These types of services include check cashing, money orders and payday loans. More than one third (35.6 percent) of households that were not banked for the FDIC report indicated that the primary reason they didn’t have an account is that they didn’t have enough funds to keep in an account, or to maintain a minimum balance. (Note that many don’t require minimum balances.) Other common reasons included the distrust or dislike of banks and high or unpredictable fees for accounts.
The correlation of the national population between bank-independent and low-income households can be seen at the state level. Seven of the 10 states with the highest proportions of unbanked individuals are among the 10 states that have low median incomes for households, as per the data from 2013’s U.S. Census American Community Survey. In fact, excepting Washington, D.C., the nine states with the highest percentage of households that were not banked had incomes for households less 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 accounts with banks is especially poor. The 2013 median post-tax income of non-banked households across the U.S. was $17,359, and was the lowest in Montana at $11,963.
Keep in mind that households with no bank accounts who make use of a prepaid debit cards without direct deposit pay an average of $488.89 in fees annually. In Montana, that would consume more than 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 or motor oil during 2015, in accordance with the U.S. Bureau of Labor Statistics.
In Washington, D.C., the difference in earnings between households with bank accounts and those without is huge. The median income of 2013 for fully banked households in D.C. was $55,032, but that was only $14,588 for those without having a bank account. This figure isn’t going to 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 only half the number of Washington apartment rentals under $800 a month than they had in 2002. The report concludes that “subsidized housing is now virtually the sole source of affordable apartments.”
3. Local unbanked demographics reflect the national trend: According to the FDIC One-fifth of black households (20.5 percent) in the U.S. in 2013 were unbanked, followed by Hispanic (17.9%) along with American Indian/Alaskan families (16.9 percent). Only 2.2 percent of Asian households were unbanked this was a lower concentration than for white (3.6%) and Pacific Islander and Hawaiian (6.1%) households.
The areas that have the highest proportion of households that are not banked reflect the national demographics. In No. 12 Tennessee as well as No. 2 Louisiana the largest state city has a majority of black residents and the largest cities are Memphis at 63 percent as well as New Orleans at 59.8%. Phoenix is at the top of our list of cities that aren’t banked, has a large Hispanic population and Albuquerque which is the biggest metropolis in New Mexico, which tied with the seventh largest state. Two states with the highest percentages of unbanked populations, New Mexico and Oklahoma, have American Indian populations nearly 10 times the size of the U.S. as a whole.
4. Access to only in-person and online banking is a problem: It’s hard to get a bank account opened if there aren’t any branches near where you reside. More than half the ZIP code in the middle of South are “bank deserts,” that is, they’ve the same or fewer branch banks, according to the MS-based Hope Policy Institute, which studies financial inclusion. According to the study of the Hope Policy Institute, the mid-South comprises Mississippi, Louisiana and Arkansas and has some of the highest rates of households without a bank account. It also encompasses the western region of Tennessee where is the home of Memphis, where nearly one-fifth (19.5 percent) of households don’t have a bank account.
Brick-and-mortar branches are even more important for consumers who can’t connect to banks online. A few Memphis residents have difficulties with both methods. According to the U.S. Census Bureau’s 2013 American Community Survey, 27.7 percent of Memphis households were without access to the internet, compared with 21.4 percent nationwide. Lack of internet access is high throughout New Orleans, too, with 27.4%.
Sreekar Jasthi is a data analyst at NerdWallet the personal finance website. 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 for unbanked households nationwide and in each state, we utilized information from the . To determine which metro regions to study 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 figures for the percentage of households that are not banked 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 range of $196.50 up to $488.89 in charges for an average unbanked household by adding in the fees that are associated with cash checks, money orders and debit cards that are prepaid. The price of these charges depends in part on whether the debit cards that are prepaid permit direct deposit.
To determine the check-cashing costs for non-banked households with prepaid debit cards without direct deposit and unbanked households with cash only we assumed two pay checks cashable per month and a fee of 1% of the check’s value. For those who use debit cards prepaid with direct deposit option, we added the cashing of checks at a cost of zero. For both households, we assumed one money payment per month, with an average fee of $1.40.
To calculate the average check cashing and money order fees, we used FDIC’s data on how often alternative financial services use by households of different types (banked or not), then used the lower frequency of use among banked households to the average cost.
In order to calculate the annual average cost of debit cards that are prepaid We examined 69 cards with the help of 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 that offer different plans 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 cost used was $4.98 The median out-of-network ATM cost was $2.50. We utilized the maximum cash loading fee of $4.95.
Without the direct deposit option, we had twelve monthly fees, four ATM fees per month and the two fees for cash loading per month. Signature-based and PIN-based purchase transaction fees usually don’t apply to cards that have monthly fees, so we didn’t include them.
Upcoming FDIC survey
A preview of the 2015. FDIC National Survey of Unbanked as well as Underbanked Households, set for release in its entirety on Oct. 20, 2016 The survey showed that the rate of unbanked households is now 7%, or about 8.6 million households. NerdWallet’s analysis is based on the most recent full set of information available.
The author’s bio: Laura McMullen writes about managing money for NerdWallet. Her work has appeared on The Associated Press, The New York Times, The Washington Post and many other publications.
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