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

Sep 28, 2016

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The benefits of your bank aren’t limited to the free coffee and sweets — they include things you might take for granted like cashing your checks at no cost and loans with reasonable interest rates. But for the over 9.5 million households that are not banked in the U.S., these services come with a hefty price, one that NerdWallet discovered can add hundreds of dollars every year.

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, the most current collection of data available. It was a decrease from the 2011 version of the FDIC’s Federal Deposit Insurance Corp.’s biannual survey, and the number decreased to 7% by 2015, as per an overview of the most recent editionthat will be released in October.

Missed benefits, added fees

While fewer families are avoiding financial institutions, those who are miss out on the opportunity to create emergency funds, as well as secured credit cards which can help build credit. They aren’t able to benefit from the full array of security against fraud that federally insured banks and 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 coverage of the nation on the topic to find out more about alternatives for non-banked consumers, including .)

households that do not have an account with a bank also have to pay loads of fees to financial-service providers that are expensive alternatives. NerdWallet has compiled the cost of money order, check cashing, and debit cards that are prepaid. 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 use a prepaid debit card with no direct deposit have an average annual amount of $488.89 in fees. (See our full methodology for more details.)

Unbanked households in the metropolitan and state

We examined the $196.50 in addition to the $488.89 figures in percentages of the state’s 2013 average income for households who don’t have an account with a bank, based on FDIC data. Check out on the below map, to discover the states where unbanked households are hit the hardest with fees using both the more expensive ($488.89) and lower ($196.50) estimations. You can also see which states have the highest percentage of households that do not have a bank account.

The tables below show the percentage of households without a bank account in 22 metropolitan regions and across all states, plus Washington, D.C. We determined the cost of not having an account with a bank in percentages of 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.

Unbanked households by metro area

UNBANKED HOUSEHOLDS ARE FINANCED BY THE

Rank (most to least)

State

Percentage of all households that are not banked

The average household income is unbanked and non-banked.

Total unbanked expenses of all household households (lower estimate)

Total unbanked cost across all homes (higher estimate)

Average unbanked costs as percentage 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 significantly higher for low-income households. Nationally, 7.7% of households didn’t have a bank account in 2013, however that rate was noticeably higher for households with low incomes. Nearly 20% of households that had incomes below $30k were not banked, while 24% were not banked, meaning they had more than one saving account or but utilized at least one other financial service during the previous year. These services include check cashing, money orders and payday loans. More than three-quarters (35.6%) of unbanked households surveyed in the FDIC report indicated that the primary reason for not having an account was because they don’t have enough money to maintain an account or meet a minimum balance. (Note that many do not require minimum balances.) Other common reasons included distaste or distrust for banks, as well as high or unpredictability of charges for account accounts.

The nationwide correlation between unbanked and low-income households can be seen at the state level. Seven of the states with the highest percentages of unbanked residents are among the 10 states that have 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 were home to households with incomes that were lower than the median of the 2013 U.S. median of $52,250.

2. The costs of being unbanked have the greatest impact on households with lower incomes as income among households that don’t have an account with a bank is especially low. The 2013 median post-tax income of unbanked households within the U.S. was $17,359, and was the lowest in Montana at $11,963.

Keep in mind that households with no bank accounts who utilize a prepaid debit card without direct deposit pay an average of $488.89 in annual fees. In Montana the amount would be upward of 4% of the typical household’s income that is unbanked. To give you a sense of scale, the average U.S. household spent about 3.5 percent of its income after tax on fuel and motor oil in the year 2015 as per the U.S. Bureau of Labor Statistics.

In Washington, D.C., the disparity in earnings between unbanked and banked households is staggering. The average income in 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. This figure isn’t going to go far in a place in which housing options for low-income households are shrinking. According to an D.C. Fiscal Policy report 2013 there were about half the number of Washington homes that were rented under $800 a month than the 2002. The report states that “subsidized housing is currently the only source for affordable apartments.”

3. Local unbanked demographics reflect the national trend: According to the FDIC 1/5th of black households (20.5 percent) within the U.S. in 2013 were unbanked, followed closely by Hispanic (17.9%) as well as American Indian/Alaskan household (16.9 percent). Only 2.2 percent of Asian households were not banked, which was a lower concentration than for white (3.6 percent) and Pacific Islander/Hawaiian (6.1 percent) households.

Many of the places with the highest percentage of households that are not banked are in line with these national demographics. In No. 12 Tennessee and No. 2 Louisiana the largest state city is home to a large percentage of black households in both cities, with Memphis at 63 percent while New Orleans at 59.8%. Phoenix, which tops our list of metros that are not banked, has a large Hispanic community, as does Albuquerque which is the largest metropolis within New Mexico, which tied with the seventh largest state. Two states with the highest proportions of unbanked populations, New Mexico and Oklahoma, have American Indian populations nearly 10 times the size of the U.S. as a whole.

4. In-person access is limited and online banking hurts it’s difficult to open a bank account when there aren’t branches in the area you live. More than half the ZIP code in the middle of South are “bank deserts” that is, they’ve the same or fewer branch banks, according to the Mississippi-based Hope Policy Institute, which studies financial inclusion. According to the study of the Hope Policy Institute, the mid-South comprises Mississippi, Louisiana and Arkansas, which have some of the highest rates of households that are not banked. This region includes the western part of Tennessee which is home to Memphis which is where nearly 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 via the internet. Some Memphis residents face hurdles to both methods. As per the U.S. Census Bureau’s 2013 American Community Survey, 27.7% of Memphis households did not have an internet connection, as compared with 21.4 percent across the country. Access to internet is very high throughout New Orleans, too, at 27.4 percent.

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 unbanked households

To determine the median income of unbanked households across the nation and in each state, we took information from the . To identify which metro areas to analyze, we first chose the 25 areas in the FDIC report with 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 percentages of households that are not banked across each state or metropolitan region are also taken from this report. FDIC report.

Charges that are incurred when you’re not a banker

We came up with a range between $196.50 between $196.50 and $488.89 in fees for the average unbanked household when we added the costs that are associated with cash checks or money orders, as well as pre-paid debit cards. The price of these charges depends in part on whether the households’ debit cards that are prepaid allow direct deposit.

To determine the check-cashing costs for unbanked households using prepaid debit cards without direct deposit or for those using only cash We assumed two checks that were cashed each month, and a cost that is 1% of a check’s value. For households using debit cards that are prepaid and have direct deposit, we accounted for $0 for check cashing. For both types of households we assumed that there would be one money order sent per month with an average charge of $1.40.

To determine the average check cashing and money order fees, we analyzed the FDIC’s data on the frequency of alternative financial services used by each households of different types (banked or non-banked) Then we applied the lower frequency of usage among households with bank accounts to the average cost.

To calculate the average annual cost of prepaid debit cards We examined 69 cards with the help of major issuers, high-traffic search volume as well as Pew Charitable Trust’s the offerings of the cards on the websites of’s and. For cards that offer multiple plan options, we counted each plan as an individual card.

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

With no direct deposit, we had twelve monthly fees as well as four ATM fees per month , and the two fees for cash loading each month. Signature-based and PIN-based purchase transaction fees typically don’t apply to cards that have monthly fees, so we excluded them.

Upcoming FDIC survey

A preview of the survey for the year 2015 FDIC National Survey of Unbanked as well as Underbanked Households, which is scheduled to go public in all its entirety on Oct. 20th, 2016 The survey revealed that the unbanked rate is now 7.7%, which is around 8.6 million households. The analysis of NerdWallet is based on the most current set of information available.

Author bios: Laura McMullen writes about managing money for NerdWallet. Her work has appeared in The Associated Press, The New York Times, The Washington Post, and other outlets.

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