States in the United States and Metro Areas With the Most Unbanked Households

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States as well as Metro Areas With the Most Unbanked Households
The author is Laura McMullen Assistant Assigning Editor Personal finance, financial news Laura McMullen assigns and edits financial news content. Her previous position was as a top writer for NerdWallet and covered the process of saving, budgeting and making money. She also contributed to the "Millennial Financial" column in The Associated Press. Prior to becoming a part of NerdWallet as of the year 2015 Laura worked for U.S. News & World Report, where she edited and wrote information on careers, wellness and education and also worked on the company's ranking projects. Prior to 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.





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The benefits at your local bank go beyond free coffee and candy -they offer services you might take for granted, such as free check cashing and loans that offer reasonable rates of interest. But for the more than 9.5 million people who aren't banked 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 didn't have any members with a bank account, according to the 2013 FDIC Nationwide Survey of Bankrupt and Underbanked Households, the most recent full collection of data available. That was down from the 2011 edition of the FDIC's Federal Deposit Insurance Corp.'s biannual survey, and it decreased to 7% by 2015, according to an overview of the most recent edition, which will be available in October.
Benefits not used, additional fees
Although less families are turning away from financial institutions, those who do are missing out on opportunities to save up for emergencies, and secured credit cards which can help build credit. They're not able to take advantage of the entire array of security against fraud that federally insured banks and credit unions offer, and they can't access the online and mobile banking options that could save them the time as well as money. (Read NerdWallet's coverage of the nation on the subject to learn more about the options available to unbanked consumers, including .)
households that do not have accounts with banks also incur a lot of charges to financial-service providers that are expensive alternatives. NerdWallet calculated the costs of money order, check cashing, and debit cards that are prepaid. Unbanked households that use a prepaid debit card that allows direct deposit pay an average annual amount of $196.50 in fees, while those without banks who utilize a prepaid debit card that does not allow direct deposit pay an annual average of $488.89 in fees. (See our full methodology for more details.)
Unbanked households in the metropolitan and state
We looked at the $196.50 as well as the $488.89 figures in percentages of the state's 2013 median income for households that do not have an account with a bank that are using FDIC data. Check out this map to see the states in which households without a bank account are most severely impacted by fees using both the more expensive ($488.89) and lower ($196.50) figures. It is also possible to see where the states with the greatest proportion of households with no bank account.
The table below shows the percentage of unbanked households in 22 large metro areas and in all states plus Washington, D.C. We estimated the cost of not having accounts with banks by dividing it into the household's income that is unbanked 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.
In metro areas, households are not banked.
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 expenses to all families (lower estimate)



Total unbanked costs across all households (higher estimate)



Average unbanked costs as percent of income (using more precise estimates)



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 percentage of households without a bank account is particularly high for low-income households. Nationally, 7.7% of households had no bank accounts in 2013, however, the rate was much more so for low-income households. Around 20percent of families that had incomes of less than $30,000 were unbanked and 24% were underbanked, meaning they had minimum one or more savings accounts account or but utilized at least one other financial service within the last year. These kinds of services include check cashing as well as money orders and payday loans. More than three-quarters (35.6 percent) of unbanked households surveyed in the FDIC report said the main reason they don't have an account was that they don't have enough money to keep in an account, or to maintain the required minimum balance. (Note that a lot of households don't need minimum balances.) Some of the most common reasons are the distrust or dislike of banks, and the high or unpredictability of fees for accounts.
The correlation of the national population between bank-independent and low-income households is reflected at the state-level. Seven of the 10 states that have the highest proportions of unbanked residents are among the 10 states that have one of the highest median family incomes, as per the data from 2013's U.S. Census American Community Survey. In fact, excepting Washington, D.C., the nine states with the highest percentage of households without bank accounts were home to households with incomes that were lower than the 2013 U.S. median of $52,250.
2. The costs of being unbanked hit low-income households the hardest: Income among 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 within the U.S. was $17,359, and was lowest in Montana with $11,963.
Keep in mind that households with no bank accounts who utilize a prepaid debit card without direct deposit have to pay on average $488.89 in fees annually. In Montana the amount would be upward of 4 percent of an average unbanked household's income. For context, the typical U.S. household spent about 3.5% of its post-tax earnings on gasoline as well as motor oils in 2015, as per the U.S. Bureau of Labor Statistics.
For Washington, D.C., the gap in income 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. This figure isn't going to be much more than a few dollars in a city where low-income housing opportunities are declining. According to a D.C. Fiscal Policy report 2013 there were roughly half the number of Washington homes that were rented for less than $800 a month than there were in 2002. The report states that "subsidized housing is now virtually the sole source of affordable apartments."
3. Local unbanked demographics reflect national trends: According to the FDIC 1/5th of black households (20.5%) in the U.S. in 2013 were not banked, followed by Hispanic (17.9 percent) along with American Indian/Alaskan families (16.9%). Just 2.2% of Asian households were not banked This was a smaller percentage than white (3.6 percent) and Pacific Islander/Hawaiian (6.1 percent) households.
The areas that have the highest percentage of unbanked households mirror these national demographics. In No. 12, Tennessee in addition to No. 2 Louisiana the largest state city is home to a large percentage of black households 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, has a large Hispanic community, as does Albuquerque which is the biggest city located in New Mexico, which tied for seventh among the states. Two states with the highest percentages of people who are not banked, New Mexico and Oklahoma both have American Indian populations nearly 10 times the size of those in the U.S. as a whole.
4. Limited access to in-person and online banking can be a hindrance it to get a bank account opened if there are no branches where you reside. Nearly half of the ZIP codes in the mid-South are "bank deserts," which means they've got the same or fewer banks, as per the Mississippi-based Hope Policy Institute, which examines the financial inclusion. According to the study of the Hope Policy Institute, the mid-South includes Mississippi, Louisiana and Arkansas where there are some of the highest proportions of households that are not banked. This region includes the western region of Tennessee, home to Memphis in which nearly one-fifth (19.5 percent) of households don't have a bank account.
Brick-and-mortar stores are especially important for consumers who can't connect to financial institutions via the internet. A few Memphis residents have difficulties with both methods. According to the U.S. Census Bureau's 2013 American Community Survey, 27.7 percent of Memphis households were without an internet connection, compared with 21.4 percent nationwide. Access to internet is a major issue throughout New Orleans, too, with 27.4%.
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
The income and the concentrations of households that are not banked
To calculate the median income for unbanked households nationwide and across each state we used information from the . To decide which metropolitan areas to analyze, we first chose those 25 from 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.
Figures for the percentage of unbanked households across each state or metro area are also from FDIC's report. FDIC report.
Costs associated with not having a bank account
We came up with a interval from $196.50 between $196.50 and $488.89 in fees for the average unbanked household by adding in the fees that are associated with cash checks or money orders, as well as prepaid debit cards. The price of these charges depends in part on whether these households' debit cards that are prepaid permit direct deposit.
To figure out the costs of cashing checks for non-banked households with debit cards that do not require direct deposit or for those using only cash we assumed two pay checks cashable per month and a fee that is 1% of a check's value. For households that use debit cards that are prepaid and have direct deposit we accounted for the cashing of checks at a cost of zero. For both households we assumed one cash order sent per month with an average cost of $1.40.
To determine the average cashing of checks and money order fees, we used FDIC's data regarding how often alternative financial services use by type of household (banked or not), then added the less frequent use among banked households to the average costs.
To calculate the average annual cost of debit cards with prepaid options, 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 's and 's websites. If cards have multiple plan options, we counted each plan as an individual card.
The study covers the annual cost 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 fee was $2.50. We utilized the maximum fee for cash loading of $4.95.
Without directly depositing, we assumed 12 monthly fees and four ATM fees per month and 2 cash load fees per month. PIN- and signature-based purchase transaction fees usually don't apply to cards with monthly charges, so we omitted them.
Upcoming FDIC survey
A recent preview of the 2015 FDIC National Survey of Unbanked and Underbanked Households, which is scheduled for release in all its entirety on Oct. 20, 2016 The survey revealed that the unbanked rate dropped to 7.7%, which is around 8.6 million households. NerdWallet's analysis is based upon the most recent full set of information available.



About the author: Laura McMullen writes about managing the money of NerdWallet. Her work has appeared in The Associated Press, The New York Times, The Washington Post and many other publications.







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