The idea of going to a bank and waiting in line to talk to a bank teller is starting to sound not only inconvenient, but outdated. As fewer Americans use cash and more do their banking on smartphones and computers, traditional banking is feeling more and more antiquated. It's also generally more expensive, and except for the free lollipops, it's quite unenjoyable.
When you're fed up with your bank, what are your low-fee banking alternatives? Thanks to technology, there are a few options.
Chime Bank is an all-digital bank that offers a debit card, FDIC-protected savings accounts, and a network of over 24,000 ATMs. Every time you use a Chime card to make a purchase, the bank rounds the price up to the nearest dollar and deposits the extra into your account. These micro-deposits can really add up over time, giving your savings an automatic boost without the sting of big deposits.
While digital banks like Chime make it easier and cheaper to save and invest, it's important to be aware of all the fees involved. Chime charges no minimum, monthly, or overdraft fees. A $2.50 fee transaction for ATMs outside of the MoneyPass network applies.
Acorns is another all-digital product. Acorns specializes in micro-investing and lets users automatically invest spare change, much like Chime Bank's strategy but for investing, rather than saving. You connect your credit and debit cards to your Acorns profile, and every time you make a purchase, Acorn rounds up your transaction to the nearest dollar and deposits the excess into your investment account.
Your investment account is a wrap account of exchange-traded funds (ETF) chosen based on your financial situation and financial goals. Acorns uses the Modern Portfolio Theory developed by Nobel Prize-winning economist Dr. Harry Markowitz to invest your money.
Acorns' accounts are free for up to four years after registration for college students with a valid ".edu" email addresses. Accounts with $5,000 or more pay 0.25% per year. Accounts with less than $5,000 pay a $1-per-month fee.
Ally Bank is positioning itself as the best online-only bank in North America. Think about everything a bank does -- savings accounts, checking accounts, certificates of deposit, auto and home loans -- and Ally Bank does it.
Ally offers all its banking products and services completely online. Don't want to walk into an Ally Bank? Perfect. You can't. For those rare circumstances when you need to talk with a human, Ally offers 24/7 telephone and online chatting. If you want to know how long you'll be on hold after you dial Ally's 800 number, Ally tells you on its website. As of this writing, the hold time is one minute.
Ally's accounts have no minimum monthly maintenance fees or minimum balance requirement. It offers access to over 40,000 ATMs that you can use free of charge. Ally also offers up to $10 in reimbursements per month for ATMs used outside of its network.
Online banking, bill pay, and standard checks are free. Ally does charge for less frequent services, such as wire transfers, which cost $20 a pop -- a fair fee for this service relative to Ally's competitors.
Prepaid debt cards
Basic checking accounts with traditional banks, such as Wells Fargo and Bank of America, may be out of reach for some people. Accounts without a lot of bells and whistles, such as higher interest savings rates, dedicated customer service lines, and fee waivers that require high minimum monthly balances, can cost $10 to $15 per month unless certain requirements are met.
Prepaid debit cards look and feel like standard credit and debit cards. Unlike credit and debit cards, however, prepaid debit cards can only be used to spend the amount of money added to them by users. The maximum amount of money that can be withdrawn is the amount of money a user loads onto their prepaid card. If you load $500 and spend it, that's all the money you can spend until you load more money onto the card.
Contrary to popular belief, people who use prepaid debit cards aren't always using them because they don't have access to regular bank accounts. Some people use prepaid debit cards as a budgeting tool because they can only spend what they load onto their card. Other people use prepaid debit cards because some offer advance payroll deposit, which helps them pay bills on time.
Nevertheless, anytime you use a prepaid debit card, pay close attention to the fees that come with your card. There is no such thing as a fee-free prepaid debit card.
Prosper Marketplace describes itself as "America's first marketplace lending platform." Prosper is essentially a peer-to-peer lending platform. Borrowers can get loans between $2,000 and $35,000, and investors can invest as little as $25 in each loan they select
Want to consolidate your debt, fix up your home, or get a new car? If you have a good credit score, you may qualify for an unsecured loan with a reasonable rate from Prosper.
Want to make some money by helping borrowers consolidate debt, fix up their homes, or get new cars? You can become an investor at Prosper for as little as $25. Lending through Prosper is a means to diversify investment portfolios of stocks and bonds.
It's important to understand all your investment purchases and not take on more risk than you and your portfolio can absorb. To help protect investors, Prosper limits purchases to 10% of an investor's net worth, and it rates investments with letter grades ranging from AA (low risk and low return) to HR (high risk and high return).
Prosper also offers an app called Prosper Daily (formerly BillGuard) that lets borrowers monitor their loan payments and track their spending habits with its advanced spending analytics. Another perk of is that it offers 100% free credit-score tracking through TransUnion. And the best money-saving feature of Prosper Daily is that it tracks your recurring spending; all your subscriptions and regular payments are tracked, and you're notified when any recurring fees sneakily increase.
Keep your options open
Many banks are trying to evolve to keep up with such banking competitors. Banking regulations, however, hamper the progress of traditional banks. Meanwhile, these newer companies' business models are already based on the needs of today's banking clients. Though many of these and similar alternative solutions have fees, their fees are often lower, because they use technology to reduce their overhead and their need for big capital investments like local branches.
If your banking needs don't require in-person interaction (and lollipops), then investigate these alternative solutions and others in order to find the perfect banking experience for you.