Tag: Internet-only banks

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Today the MagnifyMoney Team is Thankful For…

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Happy Thanksgiving everyone. Today, our team is taking time to spend the holiday with family and friends, but we’d like to take a moment to reflect on what we’re thankful for (related to financial products of course)!

Nick: Thankful for CFPB, Credit Unions and Startups

As you know, we launched MagnifyMoney in May of this year. Before launching the site, we spent countless hours reviewing financial products and tools to help people save money.

During the past year, a few things have really stood out for me:

  1. The Consumer Financial Protection Bureau Complaint Service. There are a lot of times when the government creates unnecessary bureaucracy or just wastes taxpayer money building bridges to nowhere. But the CFPB Complaint Service is a true public service. We have all been lost in the complex maze of a bank’s customer service department (even people who worked for banks are not immune to these service black holes). With the CFPB complaint service, you have the ability to get your complaint heard. Two members of the MagnifyMoney team had problems solved by the CFPB. It is truly a great service, and I am thankful it exists.
  2. Credit unions are looking to grow. Because of their unique structure (credit unions do not have shareholders), they can afford to charge much lower interest rates. Thankfully, over the past year, we have seen credit unions make it easier for people to join, and they have created truly incredible products to help people with credit card debt save money. Some of the great offers we have seen this year include 99% for the life of the balance with no balance transfer fee – which is amazing. I just hope the credit unions continue to invest in better digital experiences so that more people can take advantage of their offers.
  3. Startups are looking to make bank accounts cheaper and easier to use. I have learned the
    name of many small, Internet-only banks that are quietly looking to change the way we bank forever. They are innovating, eliminating unnecessary fees, paying 100x higher interest rates and creating amazing digital experiences.

I am hopeful that, over the next 12 months, we will see even better deals for consumers. And we look forward to sharing those deals with you at MagnifyMoney.

Erin: Thankful for Mobile Deposits and No ATM Fees

As an early adopter of online banking, I’ve been cashing checks with my smartphone since 2011. I probably would have tried earlier, but I was far from an early adopter to the smartphone.

I haven’t needed to step foot in a bank branch for personal deposits for years and I’m thankful I can save my time (and in some cases gas money) by depositing checks and handling my financial life from the comfort of my home, or office or wherever else I’m logged into a secured wireless network.

Speaking of Internet-only banking, I’m grateful for ATM fee reimbursement. It further nullifies the need to go into a bank branch, because I can use any (non-sketchy) ATM and ignore the obnoxious alert that I’ll be charged $3. I can ignore extra fees because my bank reimburses me! No need to fret about losing some of my money to a giant, monster, mega bank.

Just remember, loyalty doesn’t pay. Always be on the look out for the best deals. If your bank used to reimburse ATM fees, but plans to stop the practice — it’s time to switch. If your bank charges you $12 to move money from savings to check to cover an overdraft fee — it’s time to switch. If your bank only offers 0.01% interest on your savings account — get out of there! But probably not right now. Right now you should go enjoy turkey, pumpkin pie and time with your loved ones.

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Erin Lowry
Erin Lowry |

Erin Lowry is a writer at MagnifyMoney. You can email Erin at erin@magnifymoney.com

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Earning Interest, Eliminating Fees

Should Banks Start Shutting Down Branches?

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Overdraft_lg_mobile vs trad

As an early adopter of online-banking, I used to only set foot in a bank branch once a month when I needed to deposit rent. It wasn’t even my bank’s branch either. My landlord requested I directly deposit money into his checking account. He gave me his routing number and I would dutifully trudge three blocks to his community bank, handover my check and deposit slip and refuse a monthly pitch to open an account myself.

Last month, I’d had enough.

After an inciting incident of noticing I merely had a handful of checks left, I asked my landlord if we could transition to a simple wire transfer. Instead of taking 15 minutes of my time to walk to a community bank and deposit rent, I could simply click a few buttons on my computer and pay my rent.

He agreed and I, like many others, am back to being an exclusive online-bank user, with no need to visit a bank branch.

As Internet-only banks continue to spring up and online-banking becomes the new normal, traditional banks will be forced to answer a tough question: “Should bank branches be getting shut down?”

Brick-and-mortar branches are expensive

According to data from Federal Deposit Insurance Corp, the number of U.S. bank branches has dropped 5 percent since 2009.

American Banker noted some of these closures are due to mergers and acquisition deals between banks, which would naturally cause consolidation of branches that overlap.

Brick-and-mortar branches, especially underperforming ones, are costly to banks as they must pay for staff, property, and utilities expenses. Transitioning more customers to online-banking and cutting under-performing branches could help banks reduce costs.

Underperforming branches are qualified as banks doing no more than 3,000 transactions per month. Underperforming branches have risen from 21.9 percent in 2011 to 25 percent in 2014.

Internet-only banks provide less expensive products

It is no secret leaving money with traditional banks can incur asininely high fees for customers.

In fact, your neighborhood bank branch may be incurring one million dollars in hidden fees between overdraft charges, account maintenance fees and out-of-network ATM fees.

Internet-only banks, such as Ally, Bank of Internet USA and Charles Schwab offer products with little-to-no fees.

These banks are able to afford these cost-effective products and give customers a better deal by forgoing the traditional brick-and-mortar branches.

You can get fee-free accounts (yes, including no ATM fees)

Internet-only banks actually do offer fee-free accounts, even no ATM fees. Bank of Internet USA offers a fee-free checking account with no ATM fees (and reimburses fees charged at an ATM terminal), no overdraft fees and no monthly minimums or maintenance fees.

And lest we forget to mention, Internet-only banks also offer much higher interest rates on their savings accounts.

promo-savings-wide

What about grandma and grandpa (or non-smartphone users)?

Traditional branches from banks and credit unions aren’t likely to completely go away anytime soon. However, banks looking to protect their revenue by closing underperforming branches will need to education their customers on how to use online portals. Or long-time customers and non-smartphone users may leave their bank in favor of one offering an in-person experience.

From a financial perspective, banks will likely starting shutting down branches (or at least some) over the next few years. But it will be a long time before a bank branch is as antiquated as a CD player.

[Inspired by this original article on American Banker.]

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Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Erin Lowry
Erin Lowry |

Erin Lowry is a writer at MagnifyMoney. You can email Erin at erin@magnifymoney.com

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Eliminating Fees

The Best and Worst Banks for Overdraft Fees

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Overdraft_lg_mobile vs trad

If you’re looking for banks with no overdraft fees, these two banks offer checking accounts that don’t charge any insufficient fund or overdraft fees:

The catch is if you don’t have any funds in your checking account, your transaction could be declined, but the bank won’t charge you any fee for declining the transaction.

Both of them are online-only, so you won’t have a branch to visit, but you can easily deposit checks via mobile apps and you can use a wide network of ATMs to access cash.

Recently, MagnifyMoney provided information to American Banker for a story on overdrafts. The CFPB has indicated that it will start treating overdrafts as short-term lending. We couldn’t agree more: overdrafts are short-term loans, plain and simple. However, because banks charge “fees” instead of interest, they get away with outrageous pricing. In my entire banking career, I have never seen a more expensive form of short-term borrowing than an overdraft at a large American bank.

In our analysis, we looked at a simple $100 overdraft. The customer would pay back the $100 in 10 days. And then we ranked the biggest banks to see which institutions charged the most, and the least.

The absolute worst bank was Citizens Bank, where it would cost $83.93 to borrow $100 for 10 days. The best was Ally Bank, where it would cost $9. (UPDATE: Ally now charges a $25 overdraft fee).

Why such a big difference? 

If you really want to save money on banking fees, you need to ditch the traditional brick-and-mortar banks. New, challenger brands like Ally (and others, which you can find on our checking account page) have completely re-written the rulebook. They just don’t charge punitive overdraft fees.

But, even with the big banks, there are big differences between them. Although the headline overdraft fee ($35 per incident) is high and relatively consistent, there are other bits of the fine print that you have to navigate. Namely:

  • How many times per day will they charge the fee? Some banks will cap the number of charges to just a few a day. However, Citizens Bank will charge seven times. Yes – seven times in a single day!
  • Is there an extended overdraft fee? Some banks will charge you again if your balance remains negative. At Bank of America, they will charge you $35 after five days. Citizens, the worst of the banks, will charge $6.99 per day, from day four. And Capital One will not charge any extended overdraft fee.

So, that $100 overdraft would cost $34 at Citi, and $71 at PNC.

What should I do?

At the very least, don’t bank with Citizens. Their pricing is outrageous.

The best option is to switch to an internet-only bank, where the overdraft fees have been virtually eliminated.

If you want to stick with a bricks and mortar bank, make sure you choose one that limits the per-day charge and does not have an extended overdraft charge. Citibank and Capital One Bank are both good examples in that category.

Why is American Banker doing this story?

Banks that depend upon overdraft fees for their income need to be concerned. This is “easy money” for them. Any time you have predatory pricing on lending, you can generate sizable revenues. But, those revenues won’t last.

Thankfully, the CFPB is going after overdrafts. We will see where it ends, but the profit pool will definitely shrink. American Banker was interested in seeing who are the winners (like Ally, who don’t depend upon overdraft fees), and who are the losers (like Citizens Bank). Not only can the losers expect to lose significant income streams in the future, but also they should be wary of potential punitive action, lawsuits and customer attrition.

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Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at nick@magnifymoney.com

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