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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 and news Laura McMullen assigns and edits financial news articles and 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. Before joining NerdWallet at the end of 2015 Laura was employed by U.S. News & World Report which is where she created and edited articles on health, careers and education and also worked on the rankings of the company. 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 is a resident of Washington, D.C.

Sep 28, 2016

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The benefits of your local bank go beyond free coffee and candy -They offer things that you might consider to be a given, such as free check cashing and loans that offer reasonable rates of interest. However, for over 9.5 million people who aren’t banked in the U.S., these services come with a hefty price, one that NerdWallet found adds up to hundreds of dollars every year.

In the U.S., 7.7% of households had no members with a bank account, in the latest FDIC national survey of Bankrupt and Underbanked households, the most current set of information available. This was lower than the 2011 version of the Federal Deposit Insurance Corp.’s biannual survey, and it fell to 7% in 2015, according to an overview of the most recent version, due to be published in October.

Additional fees, missed benefits

While fewer families are avoiding financial institutions, those who are not taking advantage of opportunities to save up for emergencies, and secured credit cards which can help build credit. They’re not able to take advantage of the full array of protections against fraud that federally insured banks as well as credit unions have in addition to not having access to the online and mobile banking options that can save them both time and cash. (Read NerdWallet’s comprehensive coverage of national banks on the to learn more about options for unbanked consumers, including .)

Families without a bank account also pay loads of fees to costly alternative financial service providers. NerdWallet calculated 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 allows direct deposit can pay an annual average in the amount of $196.50 in fees. On the other hand, unbanked households that utilize a prepaid debit card with no direct deposit have an average annual amount of $488.89 in fees. (See our complete methodology for more information.)

Unbanked households by state and metro area

We examined our $196.50 and $488.89 figures in percentages of the state’s average 2013 income for households that do not have a bank account, using FDIC data. Explore this map to find the states where unbanked households are the most affected with fees, using both the higher ($488.89) and the lower ($196.50) estimations. You can also find out what states are home to the largest percentage of households without a bank account.

The tables below show the percentage of households without a bank account in 22 metropolitan areas and in all states plus Washington, D.C. We estimated the cost of not having a bank account as a percentage of the household income of households that are not banked 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.

In metro areas, households are not banked.

UNBANKED HOMEHOLDS BY STATE

The Rank (most to least)

State

A percentage of households are unbanked

Average unbanked household income

Total unbanked costs for all households (lower estimate)

Total unbanked cost for all homes (higher estimate)

Costs unbanked average as a 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 takeaways

1. The rate of unbanked households is disproportionately high 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 twenty percent of the households with incomes below $30,000 were unbanked and 24% were not banked that is, they have more than one saving account account or but had employed at least one alternative financial service within the last year. These services include check cashing, money orders and payday loans. More than three-quarters (35.6%) of households that were not banked for the FDIC report said the main reason they didn’t have an account was because they don’t have enough money to maintain an account, or to maintain the required minimum balance. (Note that many don’t require minimal balances.) Other reasons that are common include dislike or distrust of banks, and the high or unpredictability of fees for accounts.

The national correlation between unbanked and low-income households can be seen at the state level. Seven of the 10 states with the highest proportions of nonbanked people are among the 10 states that have low median incomes for households in the latest U.S. Census American Community Survey. With the exception of Washington, D.C., the nine states with the highest concentration of households without bank accounts had household incomes lower than the median of the 2013 U.S. median of $52,250.

2. The cost of not having a bank account are particularly affecting households with low incomes: Income among households that don’t have an account with a bank is especially poor. The average income after tax of unbanked households across the U.S. was $17,359, and the lowest was in Montana with $11,963.

Be aware that households without bank accounts that use a prepaid debit card with no direct deposit have to pay an average of $488.89 in fees annually. In Montana this would be up to 4% of the typical household’s income that is unbanked. For context, the average U.S. household spent about 3.5 percent of their income after tax on fuel or motor oil during 2015 according to the U.S. Bureau of Labor Statistics.

The situation in 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, however, it was only $14,588 for households that didn’t have having a bank account. That latter number can’t get much further in a country where housing options for those with low incomes are declining. According to an D.C. Fiscal Policy report 2013 there were roughly half as many Washington apartment rentals at less than $880 per month as they had in 2002. The report suggests “subsidized housing is currently the only source of inexpensive apartments.”

3. The local unbanked population reflects the national trend: According to the FDIC, one-fifth of households with black names (20.5 percent) across the U.S. in 2013 were unbanked, followed by Hispanic (17.9%) as well as American Indian/Alaskan household (16.9 percent). The figure was just 2.2% of Asian households had no bank accounts this was a lower percentage than white (3.6 percent) and Hawaiian/Pacific Islander (6.1 percentage) households.

The areas that have the highest concentration of unbanked households mirror these national demographics. In No. twelve Tennessee and No. 2 Louisiana the largest state city has a majority of black residents in both cities, with Memphis at 63% and New Orleans at 59.8%. Phoenix is the top city on our list of cities that aren’t banked with a significant Hispanic community and Albuquerque which is the largest town within New Mexico, which tied with the seventh largest state. Two states that have the highest proportions of populations that aren’t banked, New Mexico and Oklahoma both have American Indian populations nearly 10 times higher than the U.S. as a whole.

4. Access to only in-person and online banking can be a hindrance it’s difficult to get a bank account opened if there aren’t any branches near where you live. More than half of ZIP code in the middle of South region are “bank deserts,” meaning they have just one or zero bank branches, 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, which have one of the highest percentages of unbanked households. The region also includes the western part of Tennessee, home to Memphis, where nearly one-fifth (19.5%) of households don’t have a bank account.

Brick-and-mortar branches are even more important for customers who cannot connect to financial institutions online. Some Memphis residents have difficulties with both options. Based on the U.S. Census Bureau’s 2013 American Community Survey, 27.7% of Memphis households didn’t have access to the internet, compared with 21.4% nationwide. Lack of internet access is very high in New Orleans, too, with 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 in each state we utilized data from the . To identify which metro areas to examine We first picked the 25 in the FDIC report that had the highest 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 households with no bank accounts within each state as well as metropolitan area are also from FDIC’s report. FDIC report.

Charges that are incurred when you’re not a banker

We found a interval from $196.50 between $196.50 and $488.89 in charges for an average unbanked household by adding the fees related to cash checking or money orders, as well as pre-paid debit cards. The price of these charges depends in part on whether the prepaid debit cards allow direct deposit.

To determine the check-cashing costs for households that are not banked and use debit cards that do not require direct deposit and unbanked households using only cash we assumed two pay checks that were cashed each month, and a charge of 1% of the check’s total value. For those who use debit cards prepaid with direct deposit, we added no cash for checks. For both households we assumed that there would be one money purchase per month and an average fee of $1.40.

To determine the average of check cashing and money-order fees, we used FDIC’s data on how often alternative financing services use by type of household (banked or unbanked), then added the less frequent use by households that are banked to the cost average.

In order to calculate the annual average cost of debit cards with prepaid options, we examined 69 cards with the help of major issuers, search volume including Pew Charitable Trust’s as well as the card offerings listed on the websites of’s and. If cards have several plans we considered each plan as a separate card.

The report includes the annual costs of an prepaid debit card 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 utilized the maximum cash loading fee of $4.95.

In the absence of direct deposit, we had twelve monthly fees as well as four ATM fees per month and the two fees for cash loading per month. Signature-based and PIN-based purchase transaction fees aren’t usually applicable to cards with monthly fees, so we omitted them.

Upcoming FDIC survey

A preview of the survey for the year 2015 FDIC National Survey of the Unbanked and Underbanked Households, scheduled for release in full on October. 20, 2016, revealed that the unbanked rate dropped to 7percent, which is about 8.6 millions of households. NerdWallet’s analysis is based upon the most up-to-date set of data available.

About the author: Laura McMullen writes about managing money for NerdWallet. Her writing has been featured on The Associated Press, The New York Times, The Washington Post as well as other outlets.

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