The Federal Deposit Insurance Corporation (FDIC) conducted a national survey in June 2013 to collect data on US households that are unbanked or underbanked. Here is the FDIC report.
What is Unbanked
Unbanked means that a person does not have a checking or savings account. The national average is 7.7% of households.
What is Underbanked
Underbanked means that a person does have a checking or savings account, but relies on alternative financial services such as check cashing services, payday loans, rent-to-own (RTO) or pawn shops. The national average is 17.9% of households.
Top 5 Unbanked / Underbanked States
- Mississippi: 16.4% unbanked, 25.2% underbanked
- Washington DC: 12.2% unbanked, 23.9% underbanked
- Georgia: 12.2% unbanked, 23.9% underbanked
- Kentucky: 11.9% unbanked, 23.7% underbanked
- Texas: 11.7% unbanked, 24.1% underbanked
Top 10 Unbanked / Underbanked Cities (More Than 100,000 Households)
- Miami, FL: 20.1% unbanked, 21.4% underbanked
- Detroit, MI: 20.0% unbanked, 29.3% underbanked
- El Paso, TX: 17.4% unbanked, 25.7% underbanked
- Cleveland, OH: 17.0% unbanked, 25.4% underbanked
- Memphis, TN: 16.7% unbanked, 28.1% underbanked
- Dallas, TX: 15.6% unbanked, 26.0% underbanked
- Houston, TX: 15.4% unbanked, 25.6% underbanked
- Buffalo, NY: 14.9% unbanked, 23.8% underbanked
- Philadelphia, PA: 14.3% unbanked, 23.5% underbanked
- Baltimore, MD: 13.9% unbanked, 25.4% underbanked
Top 7 Reasons to be Unbanked / Underbanked
- Escape debt collectors
- Be unemployed or underemployed
- Experience bad customer service
- Be annoyed with high banking fees and costs
- Be denied by banks due to high financial risk
- Have limited hours of operations or accessibility
- Be young and inexperienced with no banking history
Unbanked / Underbanked Solutions
As described above, there are many reasons why people do not use or under use banks and seek alternatives to these standard financial institutions. For banks, certain things are out of their control, such as government laws and unemployment rates. However, there are things they can do to improve the situation, such as provide great customer service, provide convenient hours of operations and control banking fees.
As long as banks and standard financial institutions are unable or unwilling to remove many of the reasons why people do not have bank accounts, people will look for alternative solutions, such as check cashing stores, payday loans, RTO and pawn shops.