With the number of bank scandals rising every week, it’s no wonder that around 35 million Americans prefer to keep their money other places. Banks are feeling the pinch of the recession, and their newly imposed fees aren’t winning over any customers. Ever since the Bank of America debacle with the $5 debit card fee, consumers have started to look for bank alternatives.
Prepaid cards and online bank accounts as bank alternatives are gaining popularity with every segment of the population. Phone apps for online bank accounts are also a growing trend, since many Americans now have smartphones with web access. Square and GoPayment are two apps that work with the ever-popular Android and iPhone platforms.
Online bank accounts are easy to set up and access. You can log into your own account using your smartphone. Transferring money from your account to another person’s account now only takes a few minutes and costs a few dollars. Exclusively online banks (without actual buildings) tend to offer higher interest rates for customers. Like traditional banks, online banks usually offer “no minimum balance” accounts, low fees, debit cards, automatic bill-pay, and cash-back rewards. The downside is that the ATM fees are higher, and you can’t walk into a branch for help. As long as the bank is FDIC-approved, your money is as safe as the cash inside a brick-and-mortar bank.
Pre-Paid Debit Cards
You might have noticed the broad array of prepaid debit cards next to every checkout counter. People who don’t have traditional bank accounts often turn to prepaid cards as bank alternatives to pay their bills and shop online. American Express now offers a card with very few fees. Other popular prepaid cards include the Walmart MoneyCard, NetSpend Visa, Western Union MoneyWise MasterCard, and many others. Some of these cards charge small fees for everything, so read the fine print before you load your money onto any prepaid card.
Recently, some prepaid cards have received heavy criticism for their exorbitant fees. The Rush Card and Kardashian Kard, both popularized by celebrity figures, are two such prepaid debit cards with hefty fees attached.
On the other hand, prepaid cards are convenient for gift-giving and storing small amounts of money for trips or vacations. Rather than bank alternatives, some people choose to use prepaid cards to buy things online instead of risking their regular Visa or MasterCard with an unknown online vendor. In addition, prepaid cards don’t require anyone to have high credit scores, making them convenient backups for anyone who has difficulty qualifying for a traditional credit card.