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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

The author is Laura McMullen Assistant Assigning Editor Personal finance, financial and news Laura McMullen assigns and edits financial news content. Her previous position was as a top writer for NerdWallet and was responsible for 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 as of the year 2015 Laura worked for U.S. News & World Report which is where she wrote and edited content related to health, careers and education and also contributed to the rankings of the company. Before working at U.S. News & World Report, Laura interned at Vice Media and studied journalism, history and Arabic at Ohio University. Laura lives in Washington, D.C.

Sep 28 September 28, 2016

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The benefits at your local bank go beyond the free coffee and sweets -They offer things that you might take for granted for example, cashing checks for free and loans that offer reasonable rates of interest. However, for the over 9.5 million people who aren’t banked within the U.S., these services come with a hefty price which NerdWallet discovered can add up to hundreds of dollars a year.

In the U.S., 7.7% of households had no members with a bank account, according to the 2013 FDIC national survey of Unbanked and Underbanked Households, which is the most current set of information available. That was down from the 2011 edition of the Federal Deposit Insurance Corp.’s biannual survey, and the number decreased to 7% by 2015, as per a preview of the latest editionthat will be published in October.

Additional fees, missed benefits

Although fewer families are forgoing banks, the ones who are miss out on , in which they can build emergency funds, and secured credit cards which can assist in building credit. They don’t benefit from the entire array of security against fraud that federally insured banks and credit unions have in addition to not having access to online and mobile banking tools that could save them the time as well as money. (Read NerdWallet’s comprehensive coverage of national banks on the subject to learn more about the options available to unbanked customers, such as .)

households that do not have accounts with banks also incur a lot of charges to financial-service providers that are expensive alternatives. NerdWallet tallied the costs of money checks, cashing orders and prepaid debit cards. Households that are not banked and use a prepaid debit card that permits direct deposit pay an average annual amount for $196.50 in fees, while unbanked households that use a prepaid debit card that does not allow direct deposit pay an average annual amount of $488.89 in charges. (See our full methodology for more information.)

Unbanked households by metro and state

We examined the $196.50 in addition to the $488.89 figures as percentages of each state’s average 2013 income for households that don’t have an account with a bank and based on FDIC data. Explore the map below to see the states where households that aren’t banked are most severely impacted with fees using both the higher ($488.89) and the lower ($196.50) figures. It is also possible to see what states are home to the largest percentage of households without a bank account.

The tables below illustrate the percentage of unbanked households in 22 large metro regions and across all states, plus Washington, D.C. We calculated costs of having a bank account in percentages of the household’s income that is unbanked 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 HOMEHOLDS BY STATE

Ranking (most to least)

State

The percentage of households that aren’t banked

Average unbanked household income

Total unbanked costs of all household households (lower estimate)

Total unbanked costs for all households (higher estimate)

Average unbanked costs as percentage 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%

Important key

1. The rate of unbanked households is disproportionately high among low-income households: Nationally, 7.7% of households did not have a bank account in 2013, however this rate was significantly higher among low-income households. Nearly 20percent of families with incomes of less than $30,000 had no bank accounts, and 24% were underbanked, meaning they had more than one saving account or but had utilized at least one other financial service during the previous year. These kinds of services include cashing checks, money orders and payday loans. More than one third (35.6 percent) of unbanked households surveyed for the FDIC report indicated that the primary reason for not having an account was that they don’t have enough money to keep in an account, or to maintain a minimum balance. (Note that many do not require minimal balances.) Other reasons that are common include dislike or distrust 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 states with the highest percentages of unbanked residents are among the 10 states that have the lowest median household incomes according to the 2013 U.S. Census American Community Survey. With the exception of Washington, D.C., the nine states with the highest percentage of households without bank accounts had household incomes below the median of the 2013 U.S. median of $52,250.

2. The financial burden of not having a bank have the greatest impact on households with lower incomes households: The income of households that don’t have an account with a bank is especially low. The 2013 average post-tax income of households that were not banked across 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 make use of a prepaid debit cards with no direct deposit have to have to pay the equivalent of $488.89 in fees per year. 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 earnings on gasoline and motor oil in 2015, according to the U.S. Bureau of Labor Statistics.

For Washington, D.C., the disparity in earnings between banked and unbanked households is staggering. The median income of 2013 for households that had a bank account D.C. was $55,032, but it was just $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 declining. According to an D.C. Fiscal Policy report, in 2013, there were roughly half the number of Washington apartment rentals under $800 a month than there were in 2002. The report concludes that “subsidized housing is now virtually the sole source of affordable housing.”

3. Local unbanked demographics reflect national trends: According to the FDIC One-fifth of black households (20.5%) across the U.S. in 2013 were unbanked, followed by Hispanic (17.9%) as well as American Indian/Alaskan household (16.9 percent). Only 2.2 percent of Asian households had no bank accounts this was a lower proportion than that of white (3.6%) and Pacific Islander/Hawaiian (6.1%) households.

The areas that have the highest percentage of households that are not banked are in line with these national demographics. In No. 12, Tennessee in addition to No. 2 Louisiana, each state’s biggest city is home to a large percentage of black residents and the largest cities are Memphis at 63% as well as New Orleans at 59.8%. Phoenix is the top city on our list of unbanked metros is home to a substantial Hispanic population and Albuquerque which is the biggest city within New Mexico, which tied with seventh place among states. Two states with the highest percentages of unbanked populations, New Mexico and Oklahoma, have American Indian populations nearly 10 times the size of the U.S. as a whole.

4. Access to only in-person and online banking hurts it to get a bank account opened if there are no branches where you live. More than half the ZIP codes in the mid-South are “bank deserts” meaning they have the same or fewer branch banks, according to the Mississippi-based Hope Policy Institute, which analyzes financial inclusion. According to the study of the Hope Policy Institute, the mid-South includes Mississippi, Louisiana and Arkansas and has one of the highest percentages of unbanked households. It also encompasses the western part of Tennessee where is the home of Memphis in which almost one-fifth (19.5 percent) of households do not have an account with a bank.

Brick-and-mortar locations are more crucial for those who are unable to connect to financial institutions online. A few Memphis residents are unable to use both of these methods. According to the U.S. Census Bureau’s 2013 American Community Survey, 27.7% of Memphis households were without an internet connection, as compared with 21.4 percent across the country. Access to internet is a major issue across New Orleans, too, at 27.4 percent.

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

Methodology

Concentrations of income and unbanked households

To calculate the median income of unbanked households across the nation and across all states, we used data from the . To determine which metro regions to study We first picked the 25 in the FDIC report that had 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 unbanked households in each state and metro region are also taken from FDIC’s report. FDIC report.

Costs associated with not having a bank account

We came up with a range of $196.50 to $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 cost of these fees will depend on the extent to which the debit cards are prepaid and allow direct deposit.

To calculate the cost of check cashing for households that are not banked and use prepaid debit cards without direct deposit, and for households using only cash, we assumed two paychecks cashable per month and a cost of 1% of a check’s value. For households that use debit cards prepaid with direct deposit option, we factored in no cash for checks. For both types of households, we assumed one money purchase per month and an average charge of $1.40.

To calculate the average check cashing and money-order fees, we used FDIC’s data on what frequency alternative financing services used by each kind of household (banked or not) and then applied the lower frequency of use among banked households to the cost average.

To determine the average annual cost of prepaid debit cards, we evaluated 69 cards based on the major issuers, their high-traffic searches volume including Pew Charitable Trust’s as well as the cards listed on the websites of’s and. If cards have multiple plan options we considered each plan as an individual card.

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

With no direct deposit, we had 12 monthly charges, four ATM charges per month and the two fees for cash loading each month. Signature- and PIN-based transaction fees typically don’t apply to cards that have monthly charges, so we omitted them.

Upcoming FDIC survey

A preview of the survey for the year 2015 FDIC National Survey of Unbanked and Underbanked Households, set to be released in its entirety on October. 20th, 2016 It revealed that the unbanked rate has fallen to 7%, or about 8.6 million households. The analysis of NerdWallet is based on the most recent full set of data available.

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

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