To Bank or Not to Bank: Digital Banking 101

Published by Imani Benjamin on

To Bank or Not to Bank: Digital Banking 101

Money is something we want to keep safe. You can store it anywhere: your back pocket, under your mattress or buried in the backyard. Barring a house fire, your money should be safe. A bank, however, keeps your money safe from house fires and also earns interest on your savings (this means your money can grow). 

Banks do come with a lot of fees. Maintenance fees, monthly fees, minimum balance fees, overdraft and overdraft protection fees, check fees and a whole host of other things you use to keep your money safe. Not all banks charge an arm and a leg to keep your money safe, but there is an alternative –  online-only banks with “free-free” checking accounts. 

Online-only banks have been around since 2009. Banks like Ally Bank, formerly GMAC, give customers the ability to work with a bank without a physical location. These mobile and internet banks provide customers with convenience and ease of access to their bank account. 

Checking accounts and fees

Your checking account is a holding account that allows unlimited withdrawals and deposits. Unlike a savings account, which can cap the number of withdrawals and deposits you make, checking accounts are meant to fluctuate constantly as people get paid and pay their bills. Most banks attach monthly maintenance fees or additional fees that go towards actions like closing your account, stop payment on a bill or to cover overdraft. 

The appeal of many online banks is the free-free aspect. Because online-only banks do not have brick-and-mortar locations, there are no maintenance or monthly fees that need to be paid. 

The average American bank charges between $5 and $20 for maintenance fees. There’s a bunch of other fees that can be accrued depending on your checking account. It varies with  who you bank with, and these fees can be on the higher or lower end of the scale.  

Bank of America charges $14 per statement cycle, $47 in overdraft fees, and $221 in additional fees that include stop payment requests, foreign and domestic wire transfers, and checks. SunTrust charges between $7-$20 in maintenance fees, depending on the account opened (the Essential Checking account charges $7 while the Advantage Checking account charges $20). These accounts have between $97-$125 in additional fees including domestic transfers and stop payment fees. 

Nicole Colon-Rivera | Avant-Youth
Online-only checking account options
  • Chime was started by Chris Britt in 2013. A Chime checking account claims to be free-free with no overdraft, monthly maintenance fees or transfer fees. The only fee they have is an ATM fee. Chime is on a network of approved Green Dot ATMs that do not require a fee. Using any out-of-network ATM requires a $2.50 service fee for every use.
    •  The only issue with Chime’s checking account is that direct deposit is the only way to deposit money into your account because Chime’s does not accept deposits from ATMs. You can, however, deposit money at any retail location with GreenDot, a payment platform that funds prepaid debit cards. Chime does not currently support joint account between spouses or family members. *
      • Chime also has the Spotme functions. Members with a total monthly direct deposit of $500 or more are eligible for Spotme overdraft limits. It starts at $20 and can be increased to $100. It allows the customer to overdraw an account without accruing overdraft fees and declines any purchase over that limit. 
  • Ally Bank or Ally Financial came into existence in 2009. Formerly known as GMAC Inc, an auto financier, the company changed facing a government bailout. The bank offers a checking account without monthly maintenance fees. It is not, however, free-free. Ally Bank has about $102.50 in additional fees that includes domestic wire transfers, overdraft fees and excessive transaction fees. 
    • Ally Bank offers a high interest checking account. This means that your money can earn interest while in your checking account. All accounts that are under a daily $15,000 earn up to 0.10% APY while those over earn .50%. Couples or members with dependents can open up joint accounts. 
    • Like Chime, cash cannot be deposited into the account. It is possible to deposit money through remote deposits, online transfers or wire transfers. 
    • Ally Bank is the closest to a brick-and-mortar institution, offering the ability to refinance loans and offering auto financing.
  • Simple offers a free checking account with budgeting tools. As of 2015 they no longer have additional fees. This account, like Chime, has a Round-Up feature. Simple rounds up to the next dollar on your purchase. When these savings add up to $5, Simple deposits into your savings account. Simple does not support joint accounts between spouses or family members.
    • Simple is based around budgeting. The Safe to Spend feature gives you an accurate look at what is actually in your account. By looking at your balance and taking away the difference of established goals and regular bills, it shows how much cash you can still spend.  
    • Like Chime and Ally, there is no way to deposit cash in your account. Users can deposit money by transferring money from a linked bank, writing a money order or making a wire transfer. 

Savings accounts

  • Chime has a feature called Automatic Savings. Automatic savings can be turned on and off by the account holder and rounds up every purchase to the nearest dollar. Those savings are transferred to the savings account. Chime’s saving account, however, is not the best if you’re looking to earn interest. With an interest rate of 0.01%, it’s unlikely to earn much in your savings account. 
  • Simple implements savings within its checking account called Savings Goal. Protected Savings Goals is Simple’s version of a savings account. Out of the three accounts we feature, Simple probably has the most competitive interest rates. 
    • Simple offers a rate of 1.75% APY for accounts with a balance below $10,000. Any accounts above $10,000 can receive a rate of 1.90%. 
  • Ally Bank does not have the round-up saving features of Chime and Simple. With an interest rate of 1.60%, it’s more competitive than Chime but does not beat Simple’s rate. In addition to this, Ally is the only bank of the three that has a money market account and the ability to make a Trust account. 
    • A money market account is like a savings account that has limited functions of a checking account. Usually, money market accounts offer higher interest rates that require higher minimums. Ally, without the high minimum deposit, has an interest rate of 0.75%.  

Customer Service

Online-only banks are better to use for card-only transactions. Most online-only banks have no physical locations and can only be reached by phone, mobile app or email. This can make it difficult for users to get into contact with companies on issues concerning their accounts. 

  • Chime can be contacted by phone, mobile app and email. According to the Better Business Bureau, Chime has an A- rating, two and a half out of five stars according to 292 customer reviews and over 1,000 complaints.
    • Many of the customer reviews are related to customers being unable to access their accounts, multiple fraudulent charges or not being informed of Chime’s October 16 service outage. In addition to not being able to access their accounts, customers have complained about not being able to contact customer service to discuss these very problems. 
    • The most recent complaints on the Better Business Bureau are related to Chime’s October 16 outage. Customers were not informed of the issue and ran into multiple financial problems as they were not able to access their funds in the days the system was down.
      •  A large majority of these complaints deal with Chime’s inability to refund or reimburse money from fraudulent charges. 
    • While there are positive reviews for Chime, the abundance of negative reviews concerning the safety of its customers’ finances and ability to access their account make Chime seem like an unreliable choice if you want face to face support.  
  • Ally Bank has a Better Business Bureau rating of C. This is attributed to their relationship with their customers and the 193 complaints against the company. Ally has much less complaints compared to Chime but has a rating of 1 and a half out of five stars from 69 reviews over three years. These reviews seem to be from long-time customers who are: 
    • Unable to access their accounts
    • Have poor experiences with customer service representatives
    • Unable to resolve issues concerning their accounts without legal intervention. 
  • Simple has a Better Business Bureau rating of B+. This is attributed to the 161 complaints in the last 3 years and the one and a half out of five star rating based on only 33 reviews. The reviews range on issues including: 
    • Accounts being frozen without reason 
    • Fraudulent charges not being refunded 
    • Poor customer service

Online-only banks aren’t for everyone. The lack of a physical location allows these banks to have higher interest rates on checking and saving accounts. However, this also means customers are unable to deposit cash or speak face-to-face with a bank teller or customer service representative. 

If you’re the type of person that loves the feeling of walking into a bank and watching that check deposit, online-only banks aren’t the best fit. 

Chime, Simple and Ally Bank are few of the many online-only banks that can be used as emergency funds or main checking accounts. These online banks are becoming more popular. However your most important priority is the safety of your future financial security and your money. Regardless of which you prefer, remember to always know how your bank works, and always have money set aside for an emergency!

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