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

Sep 28, 2016

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The perks at your local bank go beyond free coffee and candy -they offer services you might consider to be a given, such as free check cashing and loans with reasonable interest rates. However, for over 9.5 million unbanked households within the U.S., these services come with a hefty price which NerdWallet found adds hundreds of dollars every year.

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. That was down from the 2011 edition of the FDIC’s Federal Deposit Insurance Corp.’s biannual survey, and the figure dropped to 7% in 2015, as per a preview of the latest version, due to be available in October.

Benefits not used, additional fees

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 aren’t able to benefit from the full array of security against fraud that federally insured banks as well as credit unions provide as well as access to online or mobile banking tools that can save them the time as well as money. (Read NerdWallet’s comprehensive coverage of national banks on the to learn more about alternatives for non-banked consumers, including .)

Families without a bank account also have to pay a lot of fees to expensive alternative financial-service providers. NerdWallet tallied the costs of money orders, check cashing and pre-paid debit cards. The households with no bank accounts that have the prepaid debit card which permits direct deposit pay an annual average of $196.50 in fees. On the other hand, those who are not banked and utilize a prepaid debit card with no direct deposit have an annual average of $488.89 in charges. (See our complete methodology for more details.)

Unbanked households are reported by state and metro area

We looked at the $196.50 as well as the $488.89 figures in percentages of the state’s 2013 average income for households that don’t have accounts with banks that are based on FDIC data. Look at on the below map, to discover the states where households that aren’t banked are hit the hardest with fees using both the higher ($488.89) as well as the less ($196.50) figures. You can also see what states are home to the largest proportion of households without a bank account.

The tables below show the percentage of households without a bank account in 22 metropolitan areas , and across all states, plus Washington, D.C. We determined costs of 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.

Metro area has a large number of households that are unbanked.

UNBANKED HOUSEHOLDS ARE FINANCED BY THE

The Rank (most to least)

State

A percentage of households aren’t banked

Income of a household that is not banked

Total unbanked costs to all families (lower estimate)

Total unbanked expenses for all homes (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%

The most important lessons to take away

1. The rate of unbanked households is significantly higher in low-income households. Nationwide, 7.7% of households didn’t have a bank account in 2013, however that rate was noticeably higher for households with low incomes. About 20percent of families with incomes less than $30k were not banked, while 24% were underbanked, meaning they had minimum one or more savings accounts or but utilized at least one other financial service during the previous year. These services include cashing checks, money orders and payday loans. More than three-quarters (35.6%) of the households without bank accounts surveyed in the FDIC report stated that the primary reason they didn’t have an account was that they didn’t have enough money to maintain an account or to meet a minimum balance. (Note that many do not require minimum balances.) Other common reasons included dislike or distrust of banks and high or unpredictable charges for account accounts.

The national correlation between unbanked and low-income households is reflected at the state-level. Seven of the states with the highest proportions of unbanked residents are among the states that have one of the highest median family incomes, according to the 2013 U.S. Census American Community Survey. In fact, excepting Washington, D.C., the nine states with the highest concentration of households without bank accounts had household incomes below the 2013 U.S. median of $52,250.

2. The cost of not having a bank account have the greatest impact on households with lower incomes as income among households who don’t have a bank account is particularly low. The 2013 median post-tax income of non-banked households in the U.S. was $17,359, and the lowest was in Montana with $11,963.

Remember that unbanked households that utilize a prepaid debit card without direct deposit pay the equivalent of $488.89 in annual fees. In Montana this would be up to 4% of the average income of a household that is not banked. For context, the average U.S. household spent about 3.5 percent of its post-tax income on gas and motor oil in the year 2015, according to the U.S. Bureau of Labor Statistics.

For Washington, D.C., the difference in earnings between households with bank accounts and those without is staggering. The median income of 2013 for households with a bank account fully in D.C. was $55,032, but that was only $14,588 for households without a bank account. This figure isn’t going to be much more than a few dollars in a city 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 apartment rentals under $800 a month than they had in 2002. The report suggests «subsidized housing is currently the only source of inexpensive housing.»

3. Local unbanked 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 closely by Hispanic (17.9 percent) as well as American Indian/Alaskan household (16.9%). The figure was just 2.2% of Asian households had no bank accounts, which was a lower percentage than white (3.6%) and Hawaiian/Pacific Islander (6.1 percent) households.

The areas that have the highest concentration of households without bank accounts mirror these national demographics. In No. 12 Tennessee in addition to No. 2 Louisiana, each state’s biggest city, has a high percentage of black households and the largest cities are Memphis at 63 percent while New Orleans at 59.8%. Phoenix, which tops our list of cities that aren’t banked, has a large Hispanic population as does Albuquerque which is the largest city within New Mexico, which tied with seventh place among states. Two states with the highest proportions of people who are not banked, New Mexico and Oklahoma both have American Indian populations nearly 10 times that of that of the U.S. as a whole.

4. In-person access is limited and online banking can be a hindrance it’s difficult to open a bank account when there aren’t branches in the area you reside. Nearly half of the ZIP areas in mid-South are «bank deserts,» which means they’ve got the same or fewer banks, as per the MS-based Hope Policy Institute, which studies financial inclusion. According to the study of the Hope Policy Institute, the mid-South is comprised of Mississippi, Louisiana and Arkansas and has one of the highest percentages of households without a bank account. It also encompasses the western part of Tennessee, home to Memphis which is where nearly one-fifth (19.5%) of households don’t have a bank account.

Brick-and-mortar locations are more crucial for those who are unable to connect to banks online. A few Memphis residents are unable to use both of these methods. Based on 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. Lack of internet access is very high in New Orleans, too, at 27.4 percent.

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

Methodology

Income and concentrations of households with no bank accounts

To calculate the average income for unbanked households nationwide and in each state We took information from the . To decide which metropolitan regions to study, we first chose those 25 from the FDIC report that contained 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.

Figures for the percentage of unbanked households within each state as well as metro region are also taken from the FDIC report.

Fees associated with being unbanked

We arrived at the range between $196.50 between $196.50 and $488.89 in fees for the typical household that is not banked, by adding the fees related to cash checking as well as money orders and pre-paid debit cards. The price of these charges is contingent on whether the prepaid debit cards allow direct deposit.

To determine the check-cashing costs for non-banked households with debit cards prepaid without direct deposit and unbanked households with cash only We assumed two checks cashable per month and a cost of 1% of a check’s total value. For households using debit cards prepaid with direct deposit option, we factored in $0 for check cashing. For both household types, we assumed one money order sent per month with an average fee of $1.40.

To determine the average of check cashing and money order fees, we used FDIC’s information on how often alternative financing services utilized by the kind of household (banked or non-banked) and then added the less frequent usage among households with bank accounts to the average costs.

To determine the average annual cost of debit cards with prepaid options we evaluated 69 cards with the help of major issuers, high-traffic search volume including Pew Charitable Trust’s as well as the card offerings listed on ‘s and ‘s websites. For cards with several plans we considered each plan as a separate card.

The analysis includes the annual costs of a prepaid debit card with and without direct deposit for payroll. The median monthly fee 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 the direct deposit option, we assumed 12 monthly charges and four ATM fees per month , and 2 cash load fees per month. Signature- and PIN-based transaction fees usually don’t apply to cards that have monthly fees, so we omitted them.

Upcoming FDIC survey

A recent preview of survey for the year 2015 FDIC National Survey of Unbanked and Underbanked Households, set for release in its entirety on Oct. 20, 2016 It showed that the rate of unbanked households has fallen to 7.7%, which is around 8.6 million households. NerdWallet’s analysis is based on the most current 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 publications.

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