States in the United States and Metro Areas With the Most Unbanked Households

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States as well as Metro Areas With the Most Unbanked Households

By Laura McMullen Assistant Assigning Editor Financial, personal finance news Laura McMullen assigns and edits financial news articles and content. She was previously a senior writer at NerdWallet and was responsible for the process of saving, budgeting and making money. She was also a contributor to “Millennial Financial” column of The Associated Press. Before joining NerdWallet in 2015, Laura was employed by U.S. News & World Report which is where she wrote and edited content related to careers, wellness and education and also contributed to the company’s ranking projects. 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 currently lives in Washington, D.C.

Sep 28, 2016

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The benefits of the local bank extend beyond the free coffee and sweets -They offer things that you may take for granted for example, free check cashing and loans that offer reasonable rates of interest. But for the greater than 9.5 million unbanked households across the U.S., these services are expensive, one that NerdWallet discovered adds up to hundreds of dollars every year.

Within the U.S., 7.7% of households didn’t have any members with a bank account according to the 2013 FDIC national survey of Bankrupt and Underbanked households, the most up-to-date collection of data available. It was a decrease from the 2011 version of the Federal Deposit Insurance Corp.’s biannual survey, and it decreased to 7% by 2015, as per an early preview of the new editionthat will be released in October.

Missed benefits, added fees

While fewer families are avoiding banks, the ones who do are missing out on opportunities to save up for emergencies, and secured credit cards that aid in building credit. They’re not able to take advantage of the full array of fraud protections offered by federally insured banks and credit unions offer in addition to not having access to online and mobile banking tools that can save them time and money. (Read NerdWallet’s comprehensive coverage of national banks on the topic to find out more about alternatives for non-banked customers, such as .)

Households that don’t have a bank account also have to pay a lot of fees to financial-service providers that are expensive alternatives. NerdWallet has compiled the cost of money orders, check cashing and prepaid debit cards. The households with no bank accounts that have a prepaid debit card that permits direct deposit pay an average annual amount in the amount of $196.50 in fees. In contrast, those without banks who use a prepaid debit card with no direct deposit have an annual average of $488.89 in fees. (See our full methodology for more details.)

Unbanked households are reported by metropolitan and state

We examined our $196.50 in addition to the $488.89 figures in percentages of the state’s 2013 median income for households that don’t have an account with a bank and according to FDIC data. Look at this map to see the states in which households without a bank account are hit the hardest with fees using both the more expensive ($488.89) as well as the less ($196.50) estimations. It is also possible to see what states are home to the largest percentage of households with no bank account.

The tables below show the proportion of households that are not banked in 22 metropolitan areas and in all states, plus Washington, D.C. We calculated the cost of not having a bank account in percentages of the average unbanked household income in the 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.

Unbanked households by metro area

UNBANKED HOUSEHOLDS ARE FINANCED BY THE

Rank (most to least)

State

Percentage of all households that are not banked

Average unbanked household income

Total unbanked cost of all household households (lower estimate)

Total unbanked cost of all household households (higher estimate)

Costs unbanked average as a percent of income (using the 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%

Important takeaways

1. The proportion of households that are not banked is disproportionately high for low-income households. Nationally, 7.7% of households didn’t have a bank account in 2013, but the rate was much higher for households with low incomes. Around twenty percent of the households with incomes below $30,000 had no bank accounts, and 24% were underbanked which means they had at least one savings account or but employed at least one alternative financial service within the last year. These types of services include check cashing or money orders, as well as payday loans. More than a third (35.6 percent) of unbanked households surveyed for the FDIC report indicated that the primary reason they don’t have an account was that they didn’t have enough money to maintain an account or to meet the required minimum balance. (Note that a lot of households don’t need the minimum amount of balance.) Other reasons that are common include the distrust or dislike of banks, as well as high or unpredictability of charges for account accounts.

The nationwide correlation between unbanked and low-income households is reflected at the state level. Seven of the 10 states that have the highest proportions of unbanked people are among the 10 states with the lowest median household incomes in the latest U.S. Census American Community Survey. Except for Washington, D.C., the nine states with the highest concentration of households that were not banked had incomes for households less 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 low. The 2013 median post-tax income of households that were not banked within the U.S. was $17,359, and was lowest in Montana at $11,963.

Remember that unbanked households that use a prepaid debit card that does not direct deposit, pay the equivalent of $488.89 in annual fees. In Montana, that would consume up to 4 percent of an typical household’s income that is unbanked. For context, the typical U.S. household spent about 3.5 percent of their post-tax earnings on gasoline as well as motor oils in 2015 in accordance with the U.S. Bureau of Labor Statistics.

The situation in Washington, D.C., the gap in income between banked and unbanked households is vast. The average income in 2013 for fully banked households in D.C. was $55,032, however, it was only $14,588 for households that didn’t have a bank account. This figure isn’t going to go far in a place where housing options for those with low incomes are diminishing. According to the D.C. Fiscal Policy report, in 2013, there were about half as many Washington homes that were rented at less than $880 per month than there were in 2002. The report concludes that “subsidized housing is currently the sole source of affordable housing.”

3. Unbanked local demographics reflect national trends: According the FDIC One-fifth of households with black names (20.5 percent) across the U.S. in 2013 were unbanked, followed closely by Hispanic (17.9 percent) as well as American Indian/Alaskan household (16.9%). Just 2.2 percent of Asian households were unbanked This was a smaller concentration than for white (3.6 percent) and Hawaiian/Pacific Islander (6.1 percentage) households.

The areas that have the highest proportion of unbanked households mirror these national demographics. In No. twelve 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% and New Orleans at 59.8%. Phoenix is at the top of our list of unbanked metros, has a large Hispanic community, as does Albuquerque, the largest town in New Mexico, which tied with the seventh largest state. Two states that have the highest proportions of unbanked populations, New Mexico and Oklahoma both have American Indian populations nearly 10 times that of those in the U.S. as a whole.

4. Limited access to in-person and online banking can be a hindrance it to create a bank account if there are no branches where you live. More than half of ZIP codes in the mid-South are “bank deserts,” that is, they’ve the same or fewer branch banks, according to the MS-based Hope Policy Institute, which analyzes 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 unbanked households. It also encompasses the western region of Tennessee, home to Memphis, where more than one-fifth (19.5%) of households don’t have an account with a bank.

Brick-and-mortar stores are especially important for customers who cannot connect to banks online. A few Memphis residents are unable to use both methods. Based on the U.S. Census Bureau’s 2013 American Community Survey, 27.7 percent of Memphis households did not have access to the internet, compared with 21.4% nationwide. Lack of internet access is very high in New Orleans, too, at 27.4%.

Sreekar Jasthi is a data analyst at NerdWallet the personal finance site. Email: . Laura McMullen is a staff writer at NerdWallet. Email: . Twitter: .

Methodology

Concentrations of income and households with no bank accounts

To calculate the average income for unbanked households nationwide and in each state We took data from the . To decide which metropolitan regions to study we first selected those 25 from the FDIC report with 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.

The percentages of households that are not banked across each state or metropolitan area are also derived from this report. FDIC report.

Charges that are incurred when you’re not a banker

We found a range of $196.50 between $196.50 and $488.89 in fees for the average household without a bank account when we added the costs related to cash checking, money orders and debit cards that are prepaid. The cost of these fees will depend on the extent to which the prepaid debit cards permit direct deposit.

To calculate the cost of check cashing 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 that is 1% of a check’s value. For households that use prepaid debit cards with direct deposit option, we accounted for no cash for checks. For both household types, we assumed one money purchase per month and an average cost of $1.40.

To determine the average check cashing and money-order fees, we analyzed the FDIC’s information regarding the frequency of alternative financial services utilized by the kind of household (banked or non-banked), then used the lower frequency of usage among households with bank accounts to the average costs.

In order to calculate the annual average cost of prepaid debit cards we looked at 69 cards, with the help of major issuers, search volume including Pew Charitable Trust’s as well as the offerings of the cards on the websites of’s and. For cards with different plans, we counted each plan as an individual card.

The report covers the annual cost of a prepaid debit card with direct deposit and without direct deposit for payroll. The median monthly cost used was $4.98 The median out-of-network ATM fee was $2.50. We utilized the maximum fee for cash loading of $4.95.

Without the direct deposit option, we had twelve monthly fees, four ATM charges per month and the two fees for cash loading each month. Signature-based and PIN-based purchase transaction fees usually don’t apply to cards with monthly fees, so we didn’t include them.

Upcoming FDIC survey

A recent preview of the 2015. FDIC National Survey of the Unbanked as well as Underbanked Households, set to be released in its entirety on October. 20, 2016 The survey showed that the rate of unbanked households has fallen to 7%, or about 8.6 millions of households. The analysis of NerdWallet is based on the most up-to-date set of information available.

The author’s bio: Laura McMullen writes about managing the money of NerdWallet. Her work has appeared on The Associated Press, The New York Times, The Washington Post and many other publications.

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