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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

The author is Laura McMullen Assistant Assigning Editor Personal finance, financial information Laura McMullen assigns and edits financial news articles and content. She was previously a senior writer for NerdWallet and wrote about budgeting, saving and making money. She was also a contributor to «Millennial Money» column for The Associated Press. Prior to becoming a part of NerdWallet in 2015, Laura worked for U.S. News & World Report, where she edited and wrote information on the health and wellness of students, careers and other topics and also worked on 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 is a resident of Washington, D.C.

Sep 28, 2016

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The perks at your bank aren’t limited to complimentary coffee and chocolate- they include things you might take for granted for example, cashing your checks at no cost and loans that offer reasonable rates of interest. But for the more than 9.5 million unbanked households in the U.S., these services come with a hefty price which NerdWallet discovered can add up to hundreds of dollars every year.

The U.S., 7.7% of households did not have a member who had a bank account as per the 2013 FDIC Nationwide Survey of Bankrupt and Underbanked Households, the most up-to-date set of data available. This was lower than the 2011 version of the Federal Deposit Insurance Corp.’s biannual survey, and it dropped to 7% in 2015, according to an overview of the most recent edition, which will be published in October.

Missed benefits, added fees

Although less families are turning away from financial institutions, those who are not taking advantage of opportunities to create emergency funds, as well as secured credit cards which can aid in building credit. They don’t benefit from the full array of security against fraud that federally insured banks as well as credit unions offer, and they can’t access online and mobile banking tools that can save them both time and cash. (Read NerdWallet’s coverage of the nation on the subject to learn more about options for unbanked consumers, like .)

Households that don’t have accounts with banks also have to pay a lot of fees to financial-service providers that are expensive alternatives. NerdWallet tallied the costs of money order, check cashing, and debit cards that are prepaid. Households that are not banked and use the prepaid debit card which permits direct deposit pay an annual average in the amount of $196.50 in fees. In contrast, unbanked households that use a prepaid debit card with no direct deposit have an annual average of $488.89 in charges. (See our complete methodology for more information.)

Unbanked households by metropolitan and state

We examined both the $196.50 as well as the $488.89 figures in percentages of the state’s average 2013 income for households that do not have an account with a bank that are according to FDIC data. Check out this map to find the states in which households without a bank account are most severely impacted with fees using both the more expensive ($488.89) as well as the less ($196.50) estimations. It is also possible to see where the states with the greatest 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 areas and in all states and Washington, D.C. We determined the cost of not having an account with a bank in percentages of the household income of households that are not banked in that 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)

State

Percentage of all households that aren’t banked

Average unbanked household income

Total unbanked expenses of all household households (lower estimate)

Total unbanked cost across all homes (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 lessons to take away

1. The percentage of households without a bank account is significantly higher in low-income households. Nationwide, 7.7% of households had no bank accounts in 2013, however that rate was noticeably higher among low-income households. Nearly 20% of households that had incomes less than $30k were not banked, while 24% of them were unbanked, meaning they had more than one saving account or but used at least one alternative financial service during the previous year. These types of services include check cashing or money orders, as well as payday loans. More than three-quarters (35.6 percent) of the households without bank accounts surveyed for the FDIC report said the main reason they don’t have an account was because they didn’t have enough funds to keep in an account or meet the required minimum balance. (Note that a lot of households don’t need minimum balances.) Some of the most common reasons are dislike or distrust of banks, and the high or unpredictability of charges for account accounts.

The correlation of the national population between bank-independent and low-income households translates to the state-level. Seven of the 10 states with the highest proportions of unbanked people are among the 10 states with 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 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 households: The income of households that don’t have a bank account is particularly small. The 2013 median post-tax income of non-banked households in the U.S. was $17,359, and was lowest in Montana at $11,963.

Remember that unbanked households that utilize a prepaid debit card that does not direct deposit, pay an average of $488.89 in annual fees. In Montana, that would consume 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 their post-tax income on gas or motor oil during the year 2015 according to the U.S. Bureau of Labor Statistics.

In Washington, D.C., the disparity in earnings between banked and unbanked households is staggering. The average 2013 income for fully banked households in D.C. was $55,032, but that was only $14,588 for households without a bank account. That latter number can’t be much more than a few dollars in a city in which housing options for low-income households are declining. According to a D.C. Fiscal Policy report in 2013, there were roughly half as many Washington apartments renting at less than $880 per month than the 2002. The report states that «subsidized housing is now virtually the only source of inexpensive housing.»

3. The local unbanked population reflects the national trend: According to the FDIC 1/5th of households with black names (20.5 percent) across the U.S. in 2013 were not banked, followed by Hispanic (17.9 percent) as well as American Indian/Alaskan household (16.9%). Only 2.2% of Asian households had no bank accounts this was a lower proportion than that of white (3.6%) and Pacific Islander/Hawaiian (6.1 percent) households.

A lot of the areas with the highest percentage of households without bank accounts mirror these national demographics. In No. 12 Tennessee in addition to No. 2 Louisiana, the state’s largest city is home to a large percentage of black residents, 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, the largest city in New Mexico, which tied with seventh place among states. Two states that have the highest proportions of people who are not banked, New Mexico and Oklahoma, have 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 is a problem: It’s hard to get a bank account opened if there aren’t branches in the area you live. Nearly half of the ZIP code in the middle of South region are «bank deserts,» that is, they’ve just one or zero bank branches, according to the Mississippi-based Hope Policy Institute, which examines the financial inclusion. The analysis of the institute shows that the mid-South comprises Mississippi, Louisiana and Arkansas where there are one of the highest percentages of unbanked households. This region includes the western part of Tennessee, home to Memphis in which nearly one-fifth (19.5 percent) of households do not have accounts with banks.

Brick-and-mortar locations are more important for customers who cannot connect to banks online. Some Memphis residents are unable to use both of these methods. 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 percent across the country. Lack of internet access is a major issue throughout New Orleans, too, at 27.4%.

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

Methodology

Income and concentrations of unbanked households

To calculate the average income of unbanked households across the nation and across all states We used data from the . To determine which metro areas to examine, we first chose the 25 in 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 figures for the percentage of unbanked households across each state or metropolitan region are also taken from FDIC’s report. FDIC report.

Fees associated with being unbanked

We came up with a price range of $196.50 between $196.50 and $488.89 in charges for an average household without a bank account by adding in the fees associated with cash checking, money orders and debit cards that are prepaid. The price of these charges depends in part on whether the households’ debit cards that are prepaid permit direct deposit.

To calculate the cost of check cashing for non-banked households with debit cards prepaid without direct deposit, and for households with cash only, we assumed two paychecks that were cashed each month, and a charge that is 1% of a check’s total value. For those who use debit cards prepaid with direct deposit, we accounted for $0 for check cashing. For both household types we assumed that there would be one money payment per month, with an average charge of $1.40.

To determine the average of cashing of checks and money order fees, we used FDIC’s data on how often alternative financing services used by each kind of household (banked or non-banked), then used the lower frequency of use among banked households to the average costs.

To calculate the average annual cost of debit cards that are prepaid, we examined 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 the websites of’s and. For cards with several plans, we counted every plan as a distinct card.

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

With no the direct deposit option, we assumed twelve monthly fees and four ATM charges per month and two cash loading fees per month. PIN- and signature-based purchase transaction fees typically don’t apply to cards that have monthly fees, which is why we omitted them.

Upcoming FDIC survey

A recent preview of the 2015. FDIC National Survey of Unbanked as well as Underbanked Households, which is scheduled to go public in full on October. 20, 2016, showed that the rate of unbanked households dropped to 7.7%, which is around 8.6 million households. NerdWallet’s analysis is based upon the most current set of data available.

The author’s bio: Laura McMullen writes about managing the money of NerdWallet. Her work has appeared in The Associated Press, The New York Times, The Washington Post as well as other outlets.

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