Louisiana, Mississippi Least Banked States in the Nation
November 27th, 2018
The Federal Deposit Insurance Corporation (FDIC) last month released its biennial survey, the 2017 FDIC National Survey of Unbanked and Underbanked Households. The latest survey reveals that Mississippi and Louisiana are the least fully banked states in the nation. In fact, fewer than 60 percent of households were fully banked – almost ten percentage points below the national average (68.4%). In the Deep South, Alabama (63.3%) and Tennessee (64.9%) also had rates below the national average. See Table 1.
In the Deep South, high unbanked rates largely contributed to the low levels of banking. Unbanked households have neither a checking nor a savings account with a mainstream financial institution like a bank or credit union. Region-wide, an estimated 955,000 households were unbanked last year, and all of the Deep South states had unbanked rates above the national average (6.5%). Mississippi (15.8%) and Louisiana (14.8%) had the highest rates of unbanked households in the United States. Although the U.S. experienced a slight decline in unbanked households from 2015-2017, Mississippi’s rate rose three percentage points and is now double the national average. The households that were most likely to be unbanked were lower-income households, less-educated households, and black households. See Table 2.
People without an account are more likely to pay higher fees for financial services and tend to be more vulnerable when financial emergencies happen. Nowhere are the rates of unbanked households higher than in the Deep South. These rates, particularly among historically underserved populations, highlight the importance of having depositories in low-income communities that are equipped and staffed with the product mix to serve local people.
Furthermore, underbanked households use alternative financial service providers like auto title lenders, check cashers, pawn shops, payday lenders, and rent-to-own stores. These businesses typically charge high fees for their services and deplete income and wealth. In the Deep South, an estimated 2 million households were underbanked last year. Table 3 provides a breakout of underbanked rates by state and select demographics.
Last year, all of the Deep South states had underbanked rates higher than the national average (18.7%). In Mississippi, the percentage of underbanked households declined by three percentage points from 2015-2017. At the same time, the rate remained one of the highest in the nation. The high rates of underbanked households in the Deep South underscore the importance of consumer protections, particularly at the federal level, and for enhanced access to affordable and comprehensive financial services in low-income communities.