The Summit Checking Account is a new account that, depending upon your personal situation, can offer exceptional value. Here are the best features:
- You earn interest on your checking account balance. You will be paid 0.25% on balances up to $2,499.99 and 1.00% on the entirety of balances of $2,500 or more.
- You can use any ATM in the world, for free. Aspiration will not charge you an ATM fee. Even better, the account offers unlimited reimbursement of ATM fees charged by other banks.
- The monthly fee can be $0. You decide how much you pay each month, and you can set that fee at $0. (We explain this rather bizarre pricing strategy below).
The 1% interest rate rivals the best savings account rates in the country. If you move both your checking account and savings account into a Summit Checking Account, you would be able to earn a high interest rate on your money while avoiding the risk of overdraft and enjoying the convenience of only having one account.
However, this account is far from perfect, or free for certain situations. In particular:
- There is an overdraft fee of $33, which rivals the “gotcha” fees of the big banks.
- Other fees also look very similar to big banks. Outgoing wire transfers cost $40. Receiving an incoming wire transfer will cost you $10. And to stop a payment will cost you $25.
- The bank is missing some very basic features. (These features will come, we are told, but are not yet available). You cannot make bill payments or write checks. And there is no mobile app available.
Aspiration is a new financial services company that aims to be “the investment firm for the middle class.” In a video on the website (that could pass for a parody if you didn’t realize they were serious), the company proclaims that it is possible to be a “capitalist with a conscience.” Lofty goals are behind the company and the products they have designed. The CEO (Andrei Cherny) was a former Clinton White House aide, and with Aspiration he is trying to take action and create a new type of financial services firm that lives up to his ideals.
All products offered by Aspiration (which includes two investment funds and a checking account) have the same pricing model. You decide how much to pay. Yes, the fee is set entirely by you, the customer. You can set it to $0. You can change the fee whenever you want. They provide a service and you decide what it is worth.
Aspiration is making a big bet.
With traditional banking, people are nickel and dimed every month. Make an out of network ATM withdrawal, and you could end up spending $10 in fees. Put your money into a savings account, and earn only 0.01%. By banking at Aspiration, you could be much better off financially than banking with your traditional bank. And you can do your own calculation and decide how much of that savings you share with Aspiration. They are hoping that you will share enough for the business to continue.
In order to open an account, you need to be invited.
We believe they have created the invitation process for two reasons. First, the team is still building out the product and they do not want too many customers as they build and test. Second, they want to create a feeling of exclusivity. Hopefully the contrived exclusivity will be dropped in favor of an easy account opening process soon.
To apply for the account, you first have to “secure your spot.” You can do that on their website here. You will be given a “position” – which will likely be above 50,000. They encourage you to “jump to the front of the line” by sharing socially. I did not jump to the front of the line, and was able to open the account quickly. It appears as though the waiting list is more for marketing purposes, to encourage social media activity and create a sense of exclusivity – rather than the result of true demand.
After you provide your email to “secure your spot,” you will receive this message:
I provided my email on August 22, 2015. On September 21, 2015, I received this message:
At that point, I was able to create my account online and apply for the checking account. Because this is an online checking account, there will be extensive KYC (know-your-customer) and compliance questions. I was required to provide:
- A link to an existing bank account. This is used to provide the initial funds in the account. I put $10 into the account for a test drive. (By doing this, Aspiration also reduces its risk, because you will have gone through the compliance checks of your existing bank).
- Answers to identity verification questions. These are questions generated by a credit bureau. So, you might be asked to answer questions about your mortgage payments, car loans, and other credit bureau items to identify yourself.
Once you finish the account opening process, it will take a few days for the account to be open and for you to receive your debit card in the mail. Although the brand is “Summit” (the account) and “Aspiration,” (the business) it is actually Radius bank that is the bank operating your account. Aspiration has partnered with Radius in a way that is similar to how Simple operated. (Simple, for those who remember, was not a bank. It created the front-end user interface, but partnered with an FDIC-regulated bank).
Pros of the Account
- Unlimited, global ATM fee reimbursement: with this account, you can use any ATM in the world and it won’t cost you a dime. Not only won’t Aspiration charge you a fee, but you will be reimbursed any fee charged by the other bank.
- One of the best interest rates in the market: At a traditional bricks-and mortar-bank, you would receive no interest on your checking account, and you would earn only 0.01% on your savings account. With this account, you earn 0.25% on the first $2,500 and 1% on everything above that amount. The best online savings account in the market is currently paying 1.12%.
- You no longer need to have a separate savings account and checking account. With that, you no longer need to worry about overdrafts. At a traditional bank, you could end up paying $10 just to have money automatically transferred from your savings account to your checking account if you make a mistake. Because you can keep all of your money in one account, you will not need to worry about overdraft transfers.
- Full FDIC insurance, up to $250,000 per account per individual.
Cons of the Account
- No online billpay functionality. These are the early days of the account, and billpay functionality is expected next year. For some accounts, you can get around this by setting up automatic debits. For example, just have your credit card debit your Summit checking account rather than sending the payment from your Summit account.
- No checks. This is a digital account, and you will not be able to write checks. Normally, with billpay capability, that would not be a problem. However, given that there is not yet billpay functionality, it is a problem. If you have a landlord who requires checks, you don’t really have any options.
- There are still a lot of “normal” bank fees. The fee schedule is based upon Radius Bank’s standard agreement. That means the other “gotcha” fees still exist, including overdraft fees, wire transfer fees (both incoming and outgoing) and other fees that shouldn’t be as high as they are.
- No mobile banking app (which also means no mobile check deposit capabilities). Again, these features are promised in 2016. But, for now, some of the most basic banking requirements just aren’t there.
Who Could Benefit From The Account Now
The perfect profile for a Summit customer today would be:
- You are paid electronically: no paper checks or cash are required for deposit
- You do not need to use billpay or write any checks, ever.
- You travel a lot, and frequently need to use ATMs that are outside of your bank’s network
- You have a lot of cash that you keep in your account and would like to earn interest on that money
Alternatives If This Account Is Not Right For You
This account is going to get better over time. By next year, it will start to become much more competitive. I have opened an account, and will wait until a mobile app and billpay are available before I start migrating my activity.
Depending upon what feature is most important to you, there are excellent alternatives:
- If you want the highest interest rate, you can earn up to 1.12% with an online savings account. You can find the best savings account here.
- If you want to avoid ATM fees globally, but need check-writing and billpay capabilities, you should open a Charles Schwab checking account. You can find that account, and others, on our checking account page.
This Looks Great And Will Get Better. But Is It Sustainable?
One of the biggest worries we have at MagnifyMoney is the following: when something looks too good to be true, it usually doesn’t last long. The offer can last for a few years, but eventually market forces will catch up with it.
Providing unlimited reimbursement of ATM fees globally is expensive. Ally originally offered the same perk and then capped that benefit at $10 per month ($120 per year), because it was impossible for them to make money on the checking accounts otherwise. Aspiration does not have a magic formula, and eventually the business will need to make money somewhere.
Often, banks do not make money on checking accounts. Instead, these accounts serve as the foundation account and the bank cross-sells other products. Perhaps this is Aspiration’s plan.
Regardless, the product is very consumer friendly and potentially lucrative. According to CrunchBase, the business has raised $20 million. Clearly, the business will need to raise more capital as it scales, especially given the low level of customer profitability expected. There is certainly limited risk to taking advantage of the great offer available now. At MagnifyMoney, we just hope that they find a way to make money sustainably. As Ally customers know all too well, it can be frustrating to switch accounts based upon a strong feature (unlimited ATM reimbursement), only to have that benefit taken away when it is deemed too expensive.