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
By Laura McMullen Assistant Assigning Editor Personal finance, financial and news Laura McMullen assigns and edits the financial news content. She was previously a senior writer for NerdWallet and was responsible for budgeting, saving and making money. She has also written for the “Millennial Financial” column for The Associated Press. Prior to making the move to NerdWallet in 2015, Laura worked for U.S. News & World Report which is where she created and edited content related to careers, wellness and education and also contributed to the company’s rankings projects. 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 currently lives in Washington, D.C.
Sep 28, 2016
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The perks at your bank aren’t limited to free coffee and candy -They offer things that you may take for granted for example, cashing your checks at no cost and loans that offer reasonable rates of interest. However, for more than 9.5 million people who aren’t banked in the U.S., these services are expensive, one that NerdWallet discovered can add up to hundreds of dollars a year.
In the U.S., 7.7% of households did not have a member who had a bank account as per the 2013 FDIC National Survey of Bankrupt and Underbanked households, the most recent full collection of data available. That was down from the 2011 version of the FDIC’s Federal Deposit Insurance Corp.’s biannual survey, and the figure decreased to 7% by 2015, according to a preview of the latest version, due to be released in October.
Additional fees, missed benefits
While fewer families are avoiding banks, the ones who are miss out on opportunities to build emergency funds, and secured credit cards that can assist in building credit. They’re not able to take advantage of the entire array of fraud protections that federally insured banks and credit unions offer as well as access to online and mobile banking tools which can save the time as well as money. (Read NerdWallet’s comprehensive coverage of national banks on the subject to learn more about options for unbanked consumers, including .)
households that do not have accounts with banks also pay loads of fees to costly alternative financial service providers. NerdWallet tallied the costs of money order, check cashing, and pre-paid debit cards. Unbanked households that use a prepaid debit card that allows direct deposit can pay an annual average for $196.50 in fees. In contrast, those who are not banked and utilize a prepaid debit card that does not allow direct deposit pay an average annual amount of $488.89 in fees. (See our full methodology for more information.)
Unbanked households by metropolitan and state
We examined both the $196.50 as well as the $488.89 figures as percentages of each state’s average 2013 income for households who don’t have a bank account that are according to FDIC data. Explore the map below to discover the states where unbanked households are most severely impacted by 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 percentage of households without a bank account.
The table below shows the proportion of households that are not banked in the 22 metro areas , and across all states plus Washington, D.C. We determined costs of having a bank account as a percentage of the household income of households that are not banked in that metro 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.
In metro areas, households are not banked.
UNBANKED HOUSEHOLDS ARE FINANCED BY THE
Rank (most to least)
State
The percentage of households that are not banked
The average household income is unbanked and non-banked.
Total unbanked cost to all families (lower estimate)
Total unbanked cost for all families (higher estimate)
Costs unbanked average as a 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%
Key takeaways
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, but this rate was significantly more so for low-income households. Around 20% of households that had incomes of less than $30k were not banked, while 24% were underbanked that is, they have minimum one or more savings accounts account or but had utilized at least one other financial service within the last year. These types of services include check cashing as well as money orders and payday loans. More than three-quarters (35.6 percent) of the households without bank accounts surveyed in the FDIC report said the main reason they don’t have an account is that they didn’t have enough funds to fund an account or meet the required minimum balance. (Note that a lot of households don’t need minimum balances.) Some of the most common reasons are the distrust or dislike of banks and high or unpredictable charges for account accounts.
The nationwide correlation between unbanked and low-income households translates to the state level. Seven of the states with the highest proportions of unbanked people are among the 10 states that have the lowest median household incomes in the latest U.S. Census American Community Survey. In fact, excepting Washington, D.C., the nine states with the highest concentration of unbanked households were home to households with incomes that were less than the 2013 U.S. median of $52,250.
2. The financial burden of not having a bank hit low-income households the hardest as income among households without accounts with banks is especially poor. The 2013 average post-tax income of households that were not banked in the U.S. was $17,359, and was lowest in Montana with $11,963.
Remember that unbanked households that utilize a prepaid debit card without direct deposit pay an average of $488.89 in annual fees. In Montana, that would consume more than 4 percent of the average income of a household that is not banked. For context, the typical U.S. household spent about 3.5 percent of its post-tax earnings on gasoline or motor oil during 2015, according to the U.S. Bureau of Labor Statistics.
For Washington, D.C., the disparity 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 that was only $14,588 for households that didn’t have a bank account. That latter number can’t go far in a place where low-income housing opportunities are diminishing. According to an D.C. Fiscal Policy report in 2013, there were only half as many Washington homes that were rented at less than $880 a month than there were in 2002. The report suggests “subsidized housing is now virtually the sole source of affordable apartments.”
3. Unbanked local demographics reflect national trends: According the FDIC, one-fifth of households with black names (20.5%) within the U.S. in 2013 were unbanked, followed by Hispanic (17.9 percent) as well as American Indian/Alaskan household (16.9 percent). Only 2.2% of Asian households were not banked, which was a lower proportion than that of white (3.6%) and Pacific Islander and Hawaiian (6.1 percent) households.
The areas that have the highest concentration of households that are not banked reflect the national demographics. In No. 12, Tennessee in addition to No. 2 Louisiana, the state’s largest city, has a high percentage of black residents, with Memphis at 63 percent as well as New Orleans at 59.8%. Phoenix is at the top of our list of unbanked metros is home to a substantial Hispanic community as does Albuquerque, the largest metropolis within New Mexico, which tied with seventh place among states. Two states that have the highest percentages of populations that aren’t banked, New Mexico and Oklahoma both have American Indian populations nearly 10 times higher than the U.S. as a whole.
4. In-person access is limited and online banking can be a hindrance: It’s hard to create a bank account if there aren’t branches in the area you live. More than half the ZIP codes in the mid-South are “bank deserts,” that is, they’ve the same or fewer bank branches, according to the MS-based Hope Policy Institute, which analyzes financial inclusion. The analysis of the institute shows that the mid-South comprises Mississippi, Louisiana and Arkansas and has one of the highest percentages of unbanked households. It also encompasses western Tennessee where is the home of Memphis, where almost one-fifth (19.5 percent) of households don’t have accounts with banks.
Brick-and-mortar locations are more important for customers who cannot connect to financial institutions via the internet. Certain Memphis residents are unable to use both of these methods. Based on the U.S. Census Bureau’s 2013 American Community Survey, 27.7 percent of Memphis households did not have an internet connection, as compared with 21.4% nationwide. Lack of internet access is a major issue across New Orleans, too, at 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 determine the median income of households that are not banked nationwide and across each state, we took information from the . To decide which metropolitan areas to analyze we first selected the 25 areas in 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 across each state or metro region are also taken from FDIC’s report. FDIC report.
Charges that are incurred when you’re not a banker
We found a price range between $196.50 to $488.89 in fees for the average household without a bank account by adding in the fees associated with cash checking as well as money orders and pre-paid debit cards. The price of these charges is contingent on whether the households’ debit cards are prepaid and allow direct deposit.
To calculate the cost of check cashing for households that are not banked and use debit cards that do not require direct deposit or for those with cash only we assumed two pay checks cashable per month and a fee of 1% of a check’s value. For households that use debit cards that are prepaid and have direct deposit we factored in the cashing of checks at a cost of zero. For both households we assumed that there would be one money purchase per month and an average fee of $1.40.
To calculate the average check cashing and money-order fees, we analyzed the FDIC’s data regarding what frequency alternative financing services utilized by the type of household (banked or not), then used the lower frequency of usage among households with bank accounts to the average costs.
To determine the average annual cost of debit cards that are prepaid, we examined 69 cards with the help of major issuers, search volume as well as Pew Charitable Trust’s the cards listed on ‘s and ‘s websites. For cards that offer different plans, we counted each plan as a separate card.
The report includes the annual cost of a prepaid debit card with and without direct deposit for payroll. The median monthly cost used was $4.98 and the median out-of-network ATM fee was $2.50. We used the maximum cash loading fee of $4.95.
In the absence of the direct deposit option, we had 12 monthly fees as well as four ATM fees per month and two cash loading fees per month. Signature- and PIN-based transaction fees typically don’t apply to cards with monthly charges, so we excluded them.
Upcoming FDIC survey
A recent preview of the 2015 FDIC National Survey of the Unbanked and Underbanked Households, set to be released in all its entirety on October. 20th, 2016 It showed that the rate of unbanked households is now 7percent, which is about 8.6 millions of households. The analysis of NerdWallet is based on the most recent full set of information available.
Author bios: Laura McMullen writes about managing money for NerdWallet. Her writing has been featured on The Associated Press, The New York Times, The Washington Post as well as other outlets.
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