NEO BANKING? Is it For You?

NEO BANKING? Is it For You?

Neobanks are no-frills financial institutions that give consumers a low-cost alternative to traditional banks. They are targeted at consumers who want what brick and mortar bank services and are comfortable with fewer options such as only having a savings and checking account.

What Is a Neobank?

Neobanks have no physical branches, the same as online-only banks; offer stripped-down services, such as just savings and checking; and do not have a bank charter. Instead, neobanks such as Chime and Current will partner with another bank that has a federal charter so that deposits are insured for up to $250,000. Federal Deposit Insurance Corp. protection is made possible by alliances with a traditional bank – Chime with The Bancorp Bank and Stride Bank, One Finance with Coastal Community Bank, and Current with Choice Financial Group and Metropolitan Commercial Bank.

The majority of neobanks focus on offering savings and checking accounts and do not provide consumer loans like auto or student loans or mortgages. Some of them, like Chime, offer overdraft protection.

Because they are stripped down in services this also applies to their fees.

While they do not have their own ATMs, Neobanks will generally partner with a network that has tens of thousands of ATMs. Chime customers, for example, can access more than 60,000 fee-free ATMs, many located in pharmacies and convenience stores.

Neobanks have been available to consumers for nearly a decade and are backed by private investors. The catch is that because they are fintechs and not banks, they are not regulated by the federal government like brick-and-mortar banks. Consumers have to file complaints via the Consumer Financial Protection Bureau and Better Business Bureau if their accounts are closed suddenly and they can’t access their cash.

Pros

  • Cheaper. These banks generally do not charge a fee to open an account or monthly maintenance fees and don’t require consumers to maintain a minimum balance.
  • Special features. Some Neobanks like Current and Chime offer consumers the ability to be paid up to two days early with direct deposit. They also offer other features such as rounding up your savings through Acorns or receiving cash back on debit card purchases via Current.

Cons

  • No physical branches. Neobanks do not have any physical branches where you can talk face to face with a teller or banker if you have questions or problems with your accounts.
  • Lack of credit products. In general, Neobanks do not offer loans.
  • Less regulation. Neobanks aren’t directly subject to the scrutiny of a federal financial agency.

The Differences Between a Neobanks and an Online Bank?


Neobanks are similar to online-only banks because they both do not have physical branches, but online-only banks typically offer a full range of banking services, including auto and personal loans as well as mortgages. Some of them, like Ally Bank, have an investing arm so that you can link your accounts and transfer money back and forth easily. These banks are also FDIC-insured via their own bank charter.

Are They Better Than a Traditional Banks?

A Neobank can offer higher savings rates because it can save costs on not having physical branches. Neobanks typically charge no fees or just nominal ones to maintain a checking account.

Unlike traditional banks, they do not offer a wide range of financial products, such as credit or investing, or consumer services such as a notary.

And this is where Southwest Check Cashing & Liquor Store comes in. We are here to help offer alternative solutions in cashing checks and getting your money into your hands no matter what type of bank account you may or may not have. We will gladly cash your large check, just call us.