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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 information Laura McMullen assigns and edits financial news content. She was previously a senior writer for NerdWallet and wrote about saving, making and budgeting money; she also contributed to the “Millennial Financial” column for The Associated Press. Before joining NerdWallet at the end of 2015 Laura had worked at U.S. News & World Report, where she wrote and edited articles on health, careers and education and also worked on the company’s ranking projects. Prior to joining U.S. News & World Report, Laura interned at Vice Media and studied journalism as well as history and Arabic at Ohio University. Laura lives in Washington, D.C.

Sep 28, 2016

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The perks at the local bank extend beyond free coffee and candy -they offer services you may take for granted for example, cashing your checks at no cost and loans with reasonable interest rates. However, for the greater than 9.5 million unbanked households across the U.S., these services have a steep cost and one that NerdWallet found adds hundreds of dollars a year.

The U.S., 7.7% of households didn’t have any members with a bank account, as per the 2013 FDIC Nationwide Survey of Bankrupt and Underbanked Households, which is the most recent full set of data available. This was lower than the 2011 version of the FDIC’s Federal Deposit Insurance Corp.’s biannual survey, and the number fell to 7% in 2015, as per a preview of the latest editionthat will be released in October.

Missed benefits, added fees

Although less families are turning away from banks, the ones who do are missing out on opportunities to save up for emergencies, and secured credit cards that help build credit. They aren’t able to benefit from the full array of protections against fraud that federally insured banks as well as credit unions offer as well as access to online and mobile banking tools that could save them the time as well as money. (Read NerdWallet’s national coverage on the subject to learn more about options for unbanked consumers, like .)

Families without a bank account also incur a lot of charges to expensive alternative financial-service providers. NerdWallet has compiled the cost of money orders, check cashing and debit cards that are prepaid. Unbanked households that use a prepaid debit card that permits direct deposit pay an average annual amount in the amount of $196.50 in fees, while unbanked households that use a prepaid debit card without direct deposit pay an average annual amount of $488.89 in charges. (See our full methodology for more information.)

Unbanked households in the state and metro area

We looked at the $196.50 and $488.89 figures in percentages of the state’s 2013 average income for households that do not have an account with a bank that are using FDIC data. Look at on the below map, to discover the states in which households without a bank account are the most affected by fees using both the more expensive ($488.89) and the lower ($196.50) estimations. You can also see which states have the highest proportion of households without a bank account.

The tables below show the percentage of unbanked households in 22 large metro areas , and across all states plus Washington, D.C. We determined the cost of not having a bank account by dividing it into 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.

Unbanked households by metro area

UNBANKED HOUSEHOLDS BY state

The Rank (most to least unbanked)

State

A percentage of households are unbanked

Income of a household that is not banked

Total unbanked costs for all households (lower estimate)

Total unbanked costs for all homes (higher estimate)

Average unbanked costs as percent 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%

Important takeaways

1. The percentage of households without a bank account is disproportionately high in low-income households. Nationwide, 7.7% of households had no bank accounts in 2013, however the rate was much higher among low-income households. Nearly twenty percent of the households with incomes of less than $30k were not banked, while 24% were not banked, meaning they had more than one saving account account or but utilized at least one other financial service during the previous year. These types of services include cashing checks as well as money orders and payday loans. More than a third (35.6%) 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 money to keep in an account, or to maintain the minimum balance. (Note that many do not require the minimum amount of balance.) Other reasons that are common include dislike or distrust of banks and high or unpredictable account fees.

The correlation of the national population between bank-independent and low-income households translates to the state level. Seven of the 10 states that have the highest proportions of unbanked individuals are among the states that have the lowest median household incomes, as per the data from 2013’s U.S. Census American Community Survey. With the exception of Washington, D.C., the nine states with the highest percentage of unbanked households had incomes for households less than the 2013 U.S. median of $52,250.

2. The cost of not having a bank account are particularly affecting households with low incomes households: The income of households without accounts with banks is especially poor. The 2013 average post-tax income of non-banked households in the U.S. was $17,359, and was lowest in Montana at $11,963.

Keep in mind that households with no bank accounts who use a prepaid debit card that does not direct deposit, have to pay the equivalent of $488.89 in annual fees. In Montana this would be up to 4% 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 post-tax earnings on gasoline as well as motor oils in the year 2015, in accordance with the U.S. Bureau of Labor Statistics.

The situation in Washington, D.C., the gap in income between households with bank accounts and those without is vast. The average 2013 income for households that had a bank account D.C. was $55,032, however, it was only $14,588 for households that didn’t have an account with a bank. This figure isn’t going to get much further in a country in which housing options for low-income households are shrinking. According to an D.C. Fiscal Policy report, in 2013, there were about half as many Washington homes that were rented for less than $800 per month as there were in 2002. The report concludes that “subsidized housing is currently the only source of inexpensive apartment units.”

3. Local unbanked demographics reflect national trends: According the FDIC 1/5th of black households (20.5 percent) within 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 not banked, which was a lower proportion than that of white (3.6%) and Pacific Islander and Hawaiian (6.1%) households.

The areas that have the highest percentage of unbanked households are in line with these 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 and New Orleans at 59.8%. Phoenix, which tops our list of unbanked metros with a significant Hispanic population and Albuquerque which is the largest town located in New Mexico, which tied for seventh among the states. Two states that have the highest proportions of populations that aren’t banked, New Mexico and Oklahoma both have American Indian populations nearly 10 times the size of that of the U.S. as a whole.

4. Limited access to in-person and online banking hurts it to open a bank account when there aren’t branches in the area you live. Nearly half of the ZIP codes in the mid-South region are “bank deserts” meaning they have only one or no bank branches, according to the MS-based Hope Policy Institute, which studies financial inclusion. The analysis of the institute shows that the mid-South includes Mississippi, Louisiana and Arkansas, which have some of the highest proportions of households without a bank account. The region also includes western Tennessee which is home to Memphis in which more than one-fifth (19.5%) of households don’t have a bank account.

Brick-and-mortar stores are especially crucial for those who are unable to connect to banks online. A few Memphis residents are unable to use both options. As per the U.S. Census Bureau’s 2013 American Community Survey, 27.7% of Memphis households didn’t have an internet connection, as compared with 21.4 percent nationwide. Access to internet is high across New Orleans, too, at 27.4%.

Sreekar Jasthi is a data analyst at NerdWallet, a personal finance site. 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 in each state We took information from the . To determine which metro areas to analyze we first selected the 25 areas in the FDIC report that had 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 unbanked households in each state and metropolitan region are also taken from FDIC’s report. FDIC report.

Charges that are incurred when you’re not a banker

We came up with a price range from $196.50 to $488.89 in charges for an average unbanked household by adding the fees related to cash checking as well as money orders and debit cards that are prepaid. The cost of these fees is contingent on whether the households’ prepaid debit cards permit direct deposit.

To determine the check-cashing costs for unbanked households using debit cards that do not require direct deposit or for those using only cash, we assumed two paychecks cashed per month and a cost of 1% of the check’s total value. For households that use debit cards prepaid with direct deposit we factored in no cash for checks. For both types of households we assumed that there would be one money order sent per month with an average fee of $1.40.

To calculate the average check cashing and money-order fees, we analyzed the FDIC’s data regarding how often alternative financing services use by kind of household (banked or unbanked) and then added the less frequent use among banked households to the cost average.

In order to calculate the annual average cost of prepaid debit cards We evaluated 69 cards based on major issuers, high-traffic search volume as well as Pew Charitable Trust’s the card offerings listed on ‘s and ‘s websites. For cards that offer multiple plan options We counted every plan as a distinct card.

The study includes the annual costs 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 cost was $2.50. We paid the maximum cash loading fee of $4.95.

Without directly depositing, we had 12 monthly fees as well as four ATM fees per month , and 2 cash load fees per month. PIN- and signature-based purchase transaction fees usually don’t apply to cards with monthly charges, so we didn’t include them.

Upcoming FDIC survey

A recent preview of 2015. FDIC National Survey of the Unbanked as well as Underbanked Households, set for release in all its entirety on Oct. 20, 2016 The survey revealed that the number of households without a bank account has fallen to 7.7%, which is around 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 as well as other publications.

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