To calculate the average income for unbanked households, we used data from the 2015 FDIC National Survey of Unbanked and Underbanked Households, which found that 7% of households were unbanked. To determine the check-cashing costs for unbanked households using prepaid debit cards without direct deposit and unbanked households using only cash, we assumed two paychecks cashed per month and a 1% fee of the check’s total value. We also assumed one money order sent per month with an average fee of $1.40.

For banking costs associated with using a NerdWallet-recommended checking account, we assumed two overdrafts per year costing $15 each and no other fees. For the average checking account, we assumed two overdrafts per year at a cost of $30 each as well as maintenance fees of $7.50 per month. To calculate average check cashing and money order fees, we used the FDIC’s data on the frequency of alternative financing services use by type of household (banked or unbanked), then applied the lower frequency of use among banked households to the average costs.

To calculate the average annual cost of prepaid debit cards, we looked at 69 cards, based on major issuers, high-traffic search volume, Pew Charitable Trust’s February 2014 report and the card offerings listed on Visa and MasterCard’s websites. For cards with multiple plan options, we counted each plan as a separate card.

The analysis includes the annual costs of a prepaid debit card with and without direct deposit for payroll. The median monthly fee used was $4.98, and the median out-of-network ATM fee used was $2.50. We used the maximum cash load fee of $4.95.

For the direct deposit option, we assumed 12 monthly fees and two out-of-network ATM fees per month. For the non-direct deposit option, we assumed 12 monthly fees, four ATM fees per month, and two cash load fees per month. PIN- and signature-based purchase transaction fees typically don’t apply to cards that have monthly fees, so they were excluded.