Banking is like a rite of passage into adulthood. For most people, their first account is probably at the same bank where their parents banked. Like the insurance commercials say, you don’t have to do things the same way your parents did.
If you’re unhappy with your traditional bank, or have just had it with fees and sketchy big-bank business, consider one of the bank alternatives listed below. From prepaid cards to online-only accounts to investment-type options, there’s an option to fit all your banking needs.
1. Credit Unions
Credit unions are essentially banks except in a few very important ways: they are nonprofit, member-owned cooperatives. Usually, members share something in common like a labor union, alumni group, things like that (for example, since my dad works for the United States Postal Service, I’m able to bank at the Postal Credit Union). I like that profits are returned to members in the form of higher interest rates for savings and checking accounts. I dislike that there are far fewer amenities (for example, mobile banking is atrocious compared to some of the apps I’ve seen for others) and no-fee ATMs can be hard to come by.
2. Online and/or mobile accounts
Also in the same model of traditional banks, but solely online or accessible through your mobile device. With no brick-and-mortar locations to maintain, these types of alternative accounts can usually offer higher interest rates as well as having a serious focus on online banking user experience (I opened an account with Simple, and it’s definitely living up to it’s moniker). The downside to it is not having the comfort of a physical location, which might make some a little uneasy.
3. Prepaid cards
Prepaid cards are more of a money management tool than a true bank-alternative, but they’re a great option if you buy things online often, and worry about linking your banking information. Basically, you can load them with whatever amount you want, and then use it up. The biggest downside cited by experts include limited regulation: read the fine print to make sure that you’re not binding yourself to high fees and increasing interest rates.
4. Money market mutual funds
Some mutual fund companies allow people to also have a money market account. While they do tend to have higher yields, the FDIC does NOT insure them. If you can swing it, money market mutual funds require a minimum opening deposit of around $500 (more or less) and might force you maintain that minimum balance. Otherwise, you can write checks on the account like a normal bank account (but there are more restrictions on the amount of checks you can write per year, or that the checks need to be upwards of a certain amount). But as far as banking alternatives go, it’s one that promises the best return on investment.
In my experience, the best approach is a blend of everything. Primary banking through the credit union, *fun* money transferred into the mobile account, prepaid cards for online spending, and money market funds for investing and saving. Regardless of where you start and how far you want to take it, alternatives to traditional banking can be a great way to take control of your finances.
Which of the examples do you use (or are considering)? What information helped you make the decision?