States in the United States and Metro Areas With the Most Unbanked Households
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States in the United States and Metro Areas With the Most Unbanked Households
The author is Laura McMullen Assistant Assigning Editor Personal finance, financial information Laura McMullen assigns and edits financial news articles and content. She was previously a senior writer for NerdWallet and wrote about budgeting, saving and making money. She was also a contributor to “Millennial Financial” column of 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 articles on the health and wellness of students, careers and other topics and also contributed to the rankings of the company. Before 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 is a resident of Washington, D.C.
Sep 28, 2016
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The benefits at your bank aren’t limited to complimentary coffee and chocolateThey offer things that you might take for granted for example, free check cashing and loans with reasonable interest rates. But for the greater than 9.5 million households that are not banked across the U.S., these services have a steep cost and one that NerdWallet discovered adds hundreds of dollars per year.
Within the U.S., 7.7% of households had no members with a bank account, as per the 2013 FDIC national survey of Bankrupt and Underbanked Households, which is the most up-to-date set of data available. This was lower than the 2011 edition of the Federal Deposit Insurance Corp.’s biannual survey, and the figure fell to 7% in 2015, as per an early preview of the new edition, which will be published in October.
Missed benefits, added fees
Although fewer families are forgoing financial institutions, those who are not taking advantage of , in which they can save up for emergencies, and secured credit cards that help build credit. They aren’t able to benefit from the full array of fraud protections that federally insured banks as well as credit unions provide as well as access to online or mobile banking tools which can save time and money. (Read NerdWallet’s comprehensive coverage of national banks on the topic to find out more about alternatives for non-banked consumers, including .)
Families without a bank account also have to pay a lot of fees to costly alternative financial service providers. NerdWallet calculated the costs of money checks, cashing orders and debit cards that are prepaid. The households with no bank accounts that have the prepaid debit card which allows direct deposit can pay an annual average of $196.50 in fees. In contrast, those who are not banked and use a prepaid debit card that does not allow direct deposit pay an annual average of $488.89 in fees. (See our full methodology for more details.)
Unbanked households are reported by metro and state
We looked at our $196.50 as well as the $488.89 figures as percentages of each state’s 2013 median income for households who don’t have an account with a bank, according to FDIC data. Look at on the below map, to see the states in which households without a bank account are most severely impacted by fees, using both the higher ($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 table below shows the proportion of households that are not banked in the 22 metro areas and in all states plus Washington, D.C. We estimated the cost of not having an account with a bank by dividing it into 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.
Metro area has a large number of households that are unbanked.
UNBANKED HOUSEHOLDS BY state
Rank (most to least unbanked)
The percentage of households that aren’t banked
Income of a household that is not banked
Total unbanked cost to all families (lower estimate)
Total unbanked expenses across all homes (higher estimate)
Average unbanked costs as percent of income (using more precise estimates)
District of Columbia
The most important lessons to take away
1. The rate of unbanked households is disproportionately high in low-income households. Nationwide, 7.7% of households did not have a bank account in 2013, but this rate was significantly higher for households with low incomes. Nearly 20% of households that had incomes less than $30k were not banked, while 24% were underbanked that is, they have more than one saving account or but had utilized at least one other financial service within the last year. These kinds of services include check cashing as well as money orders and payday loans. More than one third (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 maintain an account or to meet a minimum balance. (Note that a lot of households don’t need minimum balances.) Some of the most common reasons are dislike or distrust of banks and high or unpredictable charges for account accounts.
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 people are among the states that have one of the highest median family incomes, according to the 2013 U.S. Census American Community Survey. In fact, excepting Washington, D.C., the nine states with the highest percentage of households without bank accounts had incomes for households lower than the median of the 2013 U.S. median of $52,250.
2. The cost of not having a bank account hit low-income households the hardest: Income among households without accounts with banks is especially low. The average income after tax of non-banked households within the U.S. was $17,359, and was lowest in Montana with $11,963.
Keep in mind that households with no bank accounts who use a prepaid debit card with no direct deposit have to are charged the equivalent of $488.89 in fees annually. In Montana the amount would be up to 4% of the average income of a household that is not banked. For context, the typical U.S. household spent about 3.5 percent of their post-tax earnings on gasoline or motor oil during the year 2015, as per the U.S. Bureau of Labor Statistics.
In Washington, D.C., the difference in earnings between banked and unbanked households 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. That latter number can’t get much further in a country in which housing options for low-income households are shrinking. According to a D.C. Fiscal Policy report in 2013, there were roughly half the number of Washington homes that were rented under $800 a month than there were in 2002. The report concludes that “subsidized housing is now the only source for affordable housing.”
3. Local unbanked demographics reflect national trends: According the FDIC One-fifth of households with black names (20.5 percent) in the U.S. in 2013 were not banked, followed by Hispanic (17.9%) along with American Indian/Alaskan families (16.9%). Just 2.2 percent of Asian households were not banked this was a lower proportion than that of white (3.6 percent) and Pacific Islander and Hawaiian (6.1 percent) households.
Many of the places with the highest concentration of households without bank accounts mirror these national demographics. In No. 12, Tennessee and No. 2 Louisiana the largest state city is home to a large percentage of black households, with Memphis at 63% and New Orleans at 59.8%. Phoenix is the top city on our list of cities that aren’t banked with a significant Hispanic community, as does Albuquerque which is the biggest metropolis in New Mexico, which tied for seventh among the states. Two states that have the highest proportions of people who are not banked, New Mexico and Oklahoma are home to American Indian populations nearly 10 times higher than that of the U.S. as a whole.
4. In-person access is limited and online banking is a problem it to create a bank account if there aren’t branches in the area you live. More than half of ZIP areas in mid-South are “bank deserts” that is, they’ve only one or no banks, as per the MS-based Hope Policy Institute, which examines the financial inclusion. The analysis of the institute shows that the mid-South includes Mississippi, Louisiana and Arkansas and has some of the highest rates of households without a bank account. This region includes the western region of Tennessee where is the home of Memphis which is where nearly one-fifth (19.5%) of households do not have an account with a bank.
Brick-and-mortar locations are more important for customers who cannot connect to financial institutions via the internet. A few Memphis residents are unable to use both options. Based on the U.S. Census Bureau’s 2013 American Community Survey, 27.7 percent of Memphis households didn’t have access to the internet, compared with 21.4% nationwide. Lack of internet access is very high in New Orleans, too, with 27.4%.
Sreekar Jasthi is a data analyst at NerdWallet which is a personal finance website. Email: . Laura McMullen is a staff writer at NerdWallet. Email: . Twitter: .
Concentrations of income and households that are not banked
To calculate the median income of households that are not banked nationwide and in each state we took information from the . To decide which metropolitan regions to study we first selected the 25 areas in the FDIC report that had 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.
The figures for the percentage of unbanked households within each state as well as metro area are also derived from the FDIC report.
Costs associated with not having a bank account
We arrived at the price range from $196.50 between $196.50 and $488.89 in charges for an average household without a bank account when we added the costs that are associated with cash checks or money orders, as well as prepaid debit cards. The price of these charges is contingent on whether the debit cards are prepaid and permit direct deposit.
To determine the check-cashing costs for non-banked households with debit cards that do not require direct deposit or for those that only use cash we assumed two pay checks cashable per month and a charge that is 1% of a check’s total value. For households that use debit cards prepaid with direct deposit we accounted for the cashing of checks at a cost of zero. For both households we assumed one cash purchase per month and an average charge of $1.40.
To determine the average of cashing of checks and money order fees, we used the FDIC’s statistics on the frequency of alternative financing services used by each type of household (banked or unbanked) and then applied the lower frequency of use among banked households to the average cost.
In order to calculate the annual average cost of prepaid debit cards We looked at 69 cards, based on major issuers, search volume including Pew Charitable Trust’s as well as the offerings of the cards on ‘s and ‘s websites. For cards with multiple plan options we considered each plan as a separate card.
The analysis covers the annual cost of an prepaid debit card and without direct deposit to pay payroll. The median monthly cost used was $4.98 and the median out-of-network ATM cost was $2.50. We utilized the maximum cash loading fee of $4.95.
In the absence of direct deposit, we had twelve monthly fees as well as four ATM fees per month and 2 cash load fees per month. PIN- and signature-based purchase transaction fees typically don’t apply to cards that have monthly charges, so we omitted them.
Upcoming FDIC survey
A preview of the 2015. FDIC National Survey of the Unbanked and Underbanked Households, which is scheduled to be released in all its entirety on Oct. 20th, showed that the rate of unbanked households has fallen to 7percent, which is about 8.6 million household. NerdWallet’s analysis is based on the most current set of data available.
About the author: 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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