22.3% of Arkansas households ‘underbanked’

Of the 1.135 million households in Arkansas, 22.3% are “underbanked,” compared to 17.3% for all 118.574 million U.S. households, according to a new report from the Federal Deposit Insurance Corp.

Oklahoma has 21.9% of its households (316,000) classified as underbanked.

The FDIC notes: “Underbanked households are defined as those that have a checking or savings account but rely on alternative financial services. Specifically, underbanked households have used non-bank money orders, non-bank check-cashing services, payday loans, rent-to-own agreements, or pawn shops at least once or twice a year or refund anticipation loans at least once in the past five years.”

Using that criteria, the FDIC says roughly 253,000 households in Arkansas are underbanked, with the banking status unknown of 33,000 households.

The report also shows that 10.1%, or 115,000, Arkansas households have no bank account, while 7.7% of all U.S. households are without a bank account. Of Oklahoma’s 1.445 million households, 9.8% are unbanked. Mississippi has the highest percentage (16.4%) of unbanked homes, with New Hampshire posting the lowest percentage (2.2%).

The FDIC classifies a household as unbanked if a member answered “no” to the question, “Do you or does anyone in your household currently have a checking or savings account?”

The FDIC reported in its Dec. 2 press release that the survey “is the most comprehensive survey to date” of the banking practices of the nation’s households. Most of the unbanked households are low-income and minority, according to the FDIC.

"Access to an account at a federally insured institution provides households with an important first step toward achieving financial security – the opportunity to conduct basic financial transactions, save for emergency and long-term security needs, and access credit on affordable terms," Sheila Bair, chairman of the FDIC, said in a statement. "By better understanding the households that make up this group — who they are and their reasons for being unbanked or underbanked, we will be better positioned to help them take that first step."

Key findings of the study include:
• Minorities more likely to be unbanked include blacks (21.7% of black households), Hispanics (19.3%), and American Indian/Alaskans (15.6%). Racial groups less likely to be unbanked are Asians (3.5%) and whites (3.3%).

• Households with income under $30,000 account for at least 71% of unbanked households. As income increases, the share of households that are unbanked declines considerably. Nationally, nearly 20% of lower-income U.S. households — almost 7 million households earning below $30,000 per year — do not have a bank account.  In contrast, only 4.2% of households with annual income between $30,000 and $50,000 and less than 1% of households with yearly income of $75,000 or higher are unbanked.

• Households with an annual income between $30,000 and $50,000 are almost as likely as lower-income households to be underbanked.

The top five states with the fewest underbanked are:
Minnesota: 11.1%
Massachusetts: 11.4%
New Jersey: 12%
(tie) New Hampshire: 12.1%
(tie) Vermont: 12.1%

The bottom five states in terms of the most underbanked:
Alaska: 25.5%
Mississippi: 25.2%
South Carolina: 24.2%
Texas: 24.1%
Kentucky: 23.7%

Link here for the full FDIC report.