Banking alternatives

Quick answer: There are many ways today to get convenient banking tools with or without a traditional financial institution; each option has different risks or fees that should be considered. You can use prepaid cards with no associated bank account, bank with companies that only exist online or through mobile applications or bank with a non-traditional financial institution.

Using your money without a bank

There are more options than ever for using and managing your money. Each has its pros and cons. There are increasingly more options for using and managing your money. Each one has its advantages and disadvantages.

Whatever tools you choose, inside a bank or out, make sure you understand any fees, risks and rules alongside your own personal financial needs. Whatever tools you choose, either inside or outside a bank, make sure you understand the fees, risks and rules alongside your own personal financial needs.

New Financial Tools

Prepaid cards

These can be appealing because you don’t need to have a savings or checking account to use them. Just add money to the card and spend away! That said — they come with a different set of risks and rules.

What can be great:

  • No bank account required
  • No minimum balances to watch
  • You can only spend the money that is available
  • In some cases, you have direct deposit, where your paycheck automatically added to a prepaid card

What to consider:

  • There will likely be monthly fees, fees to add money, and fees for purchases
  • You may not be able to use the card to pay bills
  • It won’t help build your credit
  • What happens if the card is lost or stolen?

New rules
Recently the Consumer Financial Protection Bureau released federal protections on prepaid accounts requiring clearer disclosures, limited fees and interest rates, and an increase in fraud protection. These rules go into effect in October 2017.

Online banks

Online banks don’t have branches, so everything happens online. You have the freedom of accessing everything digitally, but won’t be able to get immediate help in person.

What can be great:

  • Potentially higher interest earned on your accounts
  • Online access to your money
  • Good mobile apps

What to consider:

  • What ATMs can I use? Will there be fees?
  • Where can I get cash if I need to?
  • What if I lose my card? How long will it take to replace?
  • How can I contact customer service if I need help?

Online Lenders

There are now lending websites that allow people to borrow money, sometimes at lower rates than those offered through banks. However, these often come with fees (such as an origination fee or late-payment fee). Some of these are known as “peer-to-peer” lending sites, as users can borrow money directly from each other. Online lenders may be faster, but can also be more risky than traditional lenders.

Non-traditional banks

There are also financial institutions that are not called “banks.”

Credit Unions
A credit union is a nonprofit financial institution owned by people who have something in common, for example, working in the same industry. You have to become a member of a credit union to keep your money there. Most credit unions are insured by the National Credit Union Administration (NCUA).

Savings Banks
A savings bank or savings and loan association is similar to a bank. These companies were created to promote home ownership and must have a majority of their assets in housing-related loans. Although many banks also make home loans, a savings institution’s main business is to make home loans. Savings banks are usually insured by the FDIC.