The Inclusive Economy
The Most Unbanked Places in America
By Ethan Geiling on 12/14/2011 @ 04:00 PM
A large number of Americans do not have or use traditional mainstream financial products, like checking or savings accounts.
An estimated 9 million American households are unbanked, meaning they do not have a checking or savings account. An additional 21 million households are underbanked, meaning they may have an account but instead rely on alternative financial services.
In November, CFED and partners released new data on the number of unbanked and underbanked households in every census tract, city/place, and county in the country. This is the first time data of this nature has ever been released. Click here to see a fact sheet on the most unbanked places in America.
The rate of unbanked and underbanked households varies significantly by location. In many cities – like Los Altos, CA – virtually every household has and fully uses a checking or savings account. However, in other cities – like East St. Louis, IL – more than half of households are either unbanked or underbanked.
The rate of being unbanked and underbanked varies by factors like income, race and ethnicity, educational attainment, age and citizenship. So it’s not surprising that there are so few unbanked and underbanked households in Los Altos, where more than three quarters of households have an income above $75,000 and more than 80% have college degrees. Compare this to the highly-unbanked East St. Louis, where the vast majority of households have incomes below $30,000, only about 10% have a college degree and 97.3% of households are Black or African-American. Black, Hispanic and Native American households are at much greater risk of being unbanked than White or Asian households.
Where are the all-time most unbanked places in America? Many of them are very small and rural towns. Of the top 100 unbanked “places” (cities, towns, or census designated places with more than 250 households), 36 are in Texas, 17 are in Mississippi and 10 are in Arizona. All of these places have less than 4,000 households. According to our estimates, Starr County, TX is the most unbanked county in the country -- 32.7% of households are unbanked and 28.2% of households are underbanked. Starr County is a small county of less than 15,000 households located on the U.S.–Mexico border.
The top 10 counties with the highest rates of unbanked households are all in Texas, Mississippi, Louisiana and South Dakota. Of counties with more than 100,000 households, Hidalgo County, TX has the highest proportion of unbanked households (21.6%), closely followed by Bronx County, NY (20.8%). Miami-Dade County, FL (14.4%) and Philadelphia County, PA (14.3%) also made the top 10 list.
Of large cities with more than 100,000 households, Miami and Detroit have the highest rates of unbanked households in the country – approximately 1 in 5 households are unbanked. In Miami, an additional 21.3% of households are underbanked and in Detroit, an additional 29.3% of households are underbanked. Five of the top 10 most unbanked large cities are in the south.
Although many of the most unbanked “places” in America are small and rural towns, the most unbanked census tracts are urban. Of 63,900 census tracts in the country, the tract with the highest unbanked rate is located in Savannah, GA; 42.4% of households in this tract are unbanked and 35.3% are underbanked. Compare this to the city of Savannah where 13.1% are unbanked and the Savannah metro area where 8.3% are unbanked. The second most unbanked tract in the U.S. is located in Cleveland, OH at 42.3% unbanked. Of the top 100 most unbanked census tracts in the country, 7 are in El Paso, TX, 6 are in Cleveland, OH and 5 are in Los Angeles, CA.
When you use the joinbankon.org interactive map to drill down to the census tract level within cities, much more detailed patterns begin to emerge. Looking at the Chicago metropolitan area, you can see that most of the neighborhoods downtown and on the north side are a lighter purple, indicating lower rates of unbanked. However, the south and west sides of Chicago, which have much higher poverty rates, are also much more unbanked, as indicated by the darker purple.
Even within neighborhoods unbanked rates can vary greatly from block to block. For example, the image below shows a detailed map of a neighborhood on the near north side of Chicago. Only 0.5% of households are unbanked and 7.4% of households are underbanked in the “gold coast” neighborhood, one of the wealthiest areas in the country. Just a few blocks away, near the former infamous Cabrini-Green housing projects, 21.2% of households are unbanked and 28.2% of households are underbanked.
The takeaway is that there are a significant number of households across the country that don’t use checking or savings accounts. These households would substantially benefit from accounts or other responsible financial products that meet their needs. A bank or credit union account can be the first step in saving, planning for the future, building credit and climbing the economic ladder.
Unfortunately, many financial institutions have turned their backs on low-income consumers, assuming there is no profit to be made. The growing number of Bank On programs across the country are helping to reach out to financially underserved consumers through locally-led coalitions. Prepaid cards and other financial products have also started to gain traction among the underbanked.
Hopefully this new in-depth data will help financial institutions, community organizations, government agencies, policymakers and other stakeholders better serve the unbanked and underbanked population.
Click here to access the unbanked data tool.