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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

by Laura McMullen Assistant Assigning Editor Financial, personal finance news Laura McMullen assigns and edits financial news content. She was previously a senior journalist at NerdWallet and covered the process of saving, budgeting and making money. She also contributed to the “Millennial Money” column in The Associated Press. Before joining NerdWallet in 2015, Laura had worked at U.S. News & World Report in which she created and edited information on careers, wellness and education and also worked on the rankings of the company. Before working at U.S. News & World Report, Laura interned at Vice Media and studied journalism as well as history and Arabic at Ohio University. Laura is a resident of Washington, D.C.

Sep 28, 2016

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The benefits of your bank aren’t limited to free coffee and candy — they include things you might take for granted like free check cashing and loans with reasonable interest rates. But for the greater than 9.5 million households that are not banked in the U.S., these services come with a hefty price, one that NerdWallet found adds hundreds of dollars every year.

In the U.S., 7.7% of households had no members who had a bank account in the latest FDIC national survey of Bankrupt and Underbanked Households, which is the most current set of data available. That was down from the 2011 edition of the FDIC’s Federal Deposit Insurance Corp.’s biannual survey, and it dropped to 7% in 2015, according to a preview of the latest editionthat will be available in October.

Missed benefits, added fees

Although less families are turning away from financial institutions, those who are miss out on opportunities to build emergency funds, and secured credit cards that can aid in building credit. They’re not able to take advantage of the full range of protections against fraud that federally insured banks and credit unions have as well as access to the online and mobile banking options that can save them both time and cash. (Read NerdWallet’s comprehensive coverage of national banks on the to learn more about the options available to unbanked customers, such as .)

Families without an account with a bank also have to pay loads of fees to financial-service providers that are expensive alternatives. NerdWallet tallied the costs of money checks, cashing orders and debit cards that are prepaid. Households that are not banked and use a prepaid debit card that allows direct deposit pay an average annual amount in the amount of $196.50 in fees. In contrast, those without banks who make use of a prepaid debit cards with no direct deposit have an annual average of $488.89 in fees. (See our complete methodology for more details.)

Unbanked households by state and metro area

We examined the $196.50 and $488.89 figures in percentages of the state’s 2013 average income for households that don’t have a bank account and according to FDIC data. Explore the map below to find the states where unbanked households are hit the hardest by the cost of fees using both the higher ($488.89) as well as the less ($196.50) estimates. You can also see where the states with the greatest percentage of households with no bank account.

The table below shows the percentage of unbanked households in 22 metropolitan areas , and across all states, plus Washington, D.C. We estimated the cost of not having an account with a bank in percentages of the household income of households that are not banked within the metro 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.

In metro areas, households are not banked.

UNBANKED HOUSEHOLDS BY state

The Rank (most to least unbanked)

State

The percentage of households that are not banked

Average unbanked household income

Total unbanked costs to all families (lower estimate)

Total unbanked expenses across all families (higher estimate)

Costs of unbanked expenses as a percentage of income (using more precise estimates)

Mississippi

14.5%

$15,394.41

$31.08 million

$79.82 million

3.18%

Louisiana

13.9%

$20,104.15

$47.26 million

$121.37 million

2.43%

Arizona

12.8%

$20,300.92

$61.95 million

$159.07 million

2.41%

Arkansas

12.3%

$15,653.75

$29.08 million

$74.68 million

3.12%

District of Columbia

11.8%

$14,588.29

$7.46 million

$19.15 million

3.35%

West Virginia

11.0%

$18,592.82

$16.56 million

$42.54 million

2.63%

New Mexico

10.9%

$18,934.67

$17.78 million

$45.67 million

2.58%

Georgia

10.9%

$18,957.70

$81.64 million

$209.64 million

2.58%

Oklahoma

10.9%

$19,373.49

$32.56 million

$83.61 million

2.52%

South Carolina

10.5%

$19,724.50

$38.88 million

$99.84 million

2.48%

Texas

10.4%

$20,621.80

$191.63 million

$492.07 million

2.37%

Kentucky

9.7%

$15,417.32

$34.05 million

$87.45 million

3.17%

Tennessee

9.7%

$17,204.81

$48.51 million

$124.58 million

2.84%

Alabama

9.2%

$18,787.70

$36.03 million

$92.52 million

2.60%

Missouri

8.9%

$20,058.95

$42.11 million

$108.12 million

2.44%

New York

8.5%

$16,833.40

$125.19 million

$321.47 million

2.90%

North Carolina

8.4%

$17,177.65

$61.46 million

$157.82 million

2.85%

New Jersey

8.2%

$21,298.78

$51.25 million

$131.61 million

2.30%

California

8.0%

$22,211.31

$206.18 million

$529.45 million

2.20%

Nevada

7.9%

$19,047.68

$17.06 million

$43.80 million

2.57%

Illinois

7.4%

$21,036.78

$71.47 million

$183.53 million

2.32%

Ohio

7.2%

$18,777.16

$65.61 million

$168.47 million

2.60%

Indiana

7.2%

$22,675.18

$36.28 million

$93.17 million

2.16%

Montana

6.6%

$11,963.24

$5.35 million

$13.74 million

4.09%

Virginia

6.5%

$19,340.75

$39.67 million

$101.88 million

2.53%

Colorado

6.4%

$22,159.12

$25.84 million

$66.36 million

2.21%

Rhode Island

6.2%

$18,543.22

$5.12 million

$13.15 million

2.64%

Florida

6.2%

$19,376.05

$95.70 million

$245.73 million

2.52%

Delaware

6.1%

$22,921.16

$4.33 million

$11.12 million

2.13%

Kansas

6.0%

$21,820.97

$13.49 million

$34.64 million

2.24%

Massachusetts

5.8%

$22,086.69

$29.38 million

$75.45 million

2.21%

Nebraska

5.7%

$15,622.98

$8.47 million

$21.76 million

3.13%

Michigan

5.7%

$19,127.41

$42.44 million

$108.99 million

2.56%

Connecticut

5.6%

$21,036.57

$15.37 million

$39.48 million

2.32%

Wyoming

5.6%

$24,067.11

$2.65 million

$6.82 million

2.03%

Idaho

5.4%

$17,444.44

$6.39 million

$16.42 million

2.80%

Pennsylvania

5.2%

$17,820.47

$52.14 million

$133.90 million

2.74%

Wisconsin

4.8%

$16,495.70

$21.75 million

$55.85 million

2.96%

Maryland

4.8%

$24,470.06

$20.81 million

$53.43 million

2.00%

Oregon

4.5%

$16,345.12

$13.62 million

$34.98 million

2.99%

Iowa

4.5%

$18,571.62

$10.83 million

$27.81 million

2.63%

South Dakota

4.2%

$16,040.68

$2.67 million

$6.86 million

3.05%

Washington

4.1%

$17,048.35

$21.07 million

$54.10 million

2.87%

Hawaii

3.8%

$21,096.90

$3.41 million

$8.77 million

2.32%

Minnesota

3.6%

$16,228.27

$14.92 million

$38.31 million

3.01%

Utah

3.3%

$21,617.24

$6.11 million

$15.68 million

2.26%

Vermont

3.1%

$22,553.77

$1.59 million

$4.08 million

2.17%

New Hampshire

2.9%

$26,653.71

$3.00 million

$7.71 million

1.83%

North Dakota

2.8%

$22,645.30

$1.58 million

$4.06 million

2.16%

Maine

2.4%

$14,906.68

$2.57 million

$6.59 million

3.28%

Alaska

1.9%

$21,299.66

$1,002,022.57

$2,573,028.07

2.30%

Key key

1. The percentage of households without a bank account is particularly high in low-income households. Nationwide, 7.7% of households did not have a bank account in 2013, however, that rate was noticeably higher among low-income households. About twenty percent of the households that had incomes below $30,000 were unbanked and 24% of them were unbanked which means they had at least one savings or but used at least one alternative financial service during the previous year. These types of services include cashing checks, money orders and payday loans. More than a third (35.6 percent) of the households without bank accounts surveyed in the FDIC report stated that the primary reason for not having an account was because they didn’t have enough funds to maintain an account, or to maintain a minimum balance. (Note that many do not require minimum balances.) Other reasons that are common include dislike or distrust of banks, and the high or unpredictability of account fees.

The national correlation between unbanked and low-income households is reflected at the state level. Seven of the 10 states with the highest proportions of nonbanked individuals are among the 10 states that have low median incomes for households, according to the 2013 U.S. Census American Community Survey. Except for Washington, D.C., the nine states with the highest percentage of households that were not banked had household incomes lower than the median of the 2013 U.S. median of $52,250.

2. The costs of being unbanked are particularly affecting households with low incomes households: The income of households that don’t have accounts with banks is especially poor. The average income after tax of households that were not banked in the U.S. was $17,359, and was lowest in Montana with $11,963.

Keep in mind that households with no bank accounts who utilize a prepaid debit card with no direct deposit have to are charged the equivalent of $488.89 in fees annually. In Montana this would be more than 4% of the typical household’s income that is unbanked. For context, the typical U.S. household spent about 3.5 percent of its post-tax income on gas and motor oil in 2015, according to the U.S. Bureau of Labor Statistics.

The situation in Washington, D.C., the gap in income between unbanked and banked households is staggering. The median income of 2013 for households with a bank account fully in D.C. was $55,032, however, it was only $14,588 for households without an account with a bank. That latter number can’t get much further in a country where low-income housing opportunities are diminishing. According to an D.C. Fiscal Policy report in 2013, there were roughly half the number of Washington apartments renting at less than $880 per month than there were in 2002. The report suggests “subsidized housing is now virtually the only source for affordable apartment units.”

3. Unbanked local demographics reflect national trends: According the FDIC One-fifth of black households (20.5 percent) in the U.S. in 2013 were not banked, followed by Hispanic (17.9 percent) and American Indian/Alaskan households (16.9 percent). Just 2.2% of Asian households were unbanked This was a smaller proportion than that of white (3.6%) and Pacific Islander and Hawaiian (6.1 percentage) households.

Many of the places with the highest concentration of households that are not banked reflect the national demographics. In No. 12, Tennessee as well as No. 2 Louisiana the largest state city is home to a large percentage of black households in both cities, with Memphis at 63% as well as New Orleans at 59.8%. Phoenix, which tops our list of metros that are not banked with a significant Hispanic community and Albuquerque which is the largest town located in New Mexico, which tied for seventh among the states. Two states with the highest proportions of people who are not banked, New Mexico and Oklahoma are home to American Indian populations nearly 10 times the size of that of the U.S. as a whole.

4. In-person access is limited and online banking hurts: It’s hard to get a bank account opened if there aren’t any branches near where you live. More than half of ZIP codes in the mid-South are “bank deserts” meaning they have just one or zero branch banks, according to the Mississippi-based Hope Policy Institute, which studies financial inclusion. The analysis of the institute shows that the mid-South comprises Mississippi, Louisiana and Arkansas, which have some of the highest rates of households without a bank account. It also encompasses the western part of Tennessee which is home to Memphis in which almost one-fifth (19.5%) of households do not have accounts with banks.

Brick-and-mortar locations are more important for consumers who can’t connect to financial institutions online. Some Memphis residents have difficulties with both options. According to the U.S. Census Bureau’s 2013 American Community Survey, 27.7 percent of Memphis households didn’t have an internet connection, as compared with 21.4% nationwide. The number of people without internet access is very high throughout New Orleans, too, with 27.4 percent.

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: .

Methodology

Income and concentrations of households that are not banked

To calculate the median income for unbanked households nationwide and in each state We took data from the . To identify which metro areas to examine We first picked the 25 in the FDIC report that had 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 within each state as well as metro region are also taken from the FDIC report.

Charges that are incurred when you’re not a banker

We came up with a price range between $196.50 up to $488.89 in charges for an average household without a bank account by adding in the fees associated with cash checking or money orders, as well as prepaid debit cards. The price of these charges will depend on the extent to which the debit cards that are prepaid permit direct deposit.

To determine the check-cashing costs for households that are not banked and use prepaid debit cards without direct deposit or for those that only use cash We assumed two checks that were cashed each month, and a charge of 1% of the check’s 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 household types we assumed that there would be one money purchase per month and an average fee of $1.40.

To determine the average check cashing and money-order fees, we analyzed the FDIC’s information regarding the frequency of alternative financing services used by each households of different types (banked or unbanked) and then added the less frequent usage among households with bank accounts to the average costs.

To calculate the average annual cost of debit cards that are prepaid we evaluated 69 cards based on major issuers, high-traffic search volume including Pew Charitable Trust’s as well as the cards listed on ‘s and ‘s websites. For cards that offer several plans, we counted each plan as a separate card.

The analysis covers the annual cost of the prepaid debit card that comes with 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 used the maximum cash loading fee of $4.95.

In the absence of the direct deposit option, we assumed 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 excluded them.

Upcoming FDIC survey

A preview of the 2015. FDIC National Survey of Unbanked as well as Underbanked Households, set to go public in its entirety on October. 20th, revealed that the unbanked rate dropped to 7percent, which is about 8.6 million households. NerdWallet’s analysis is based on the most up-to-date set of information 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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