DISCLAIMER: These alternatives won’t by any means work for everyone; much depends on your line of work, where you live, your spending methods, and how you receive paychecks and payments. And in most cases, making the switch won’t be convenient – but hey, that’s what big banks are banking on.
One of the main reasons consumers are interested in taking their money out of big banks is that said banks are only out to increase their profits – so switching to a non-profit, member-owned cooperative is in some ways the most meaningful choice.
Members of credit unions typically become so because they share something in common, such as their employer, their community, or their labor union. If you have an immediate family member who belongs to a credit union, it’s likely you’ll be allowed to join by invite. If you’re interested in joining a credit union, visit the Credit Union National Association to find one that suits you.
Unlike the big banks, community banks are owned and operated locally, usually by employees who live in the community with you. They’re particularly ideal for those interested in starting a local business, as the employees responsible for lending decisions understand the area and the people better than a big bank.
Visit Independent Community Bankers of America to find a local bank in your area.
The two that are most well-known are probably ING Direct and Ally, though there are others, like the newly launched BankSimple. It might seem odd to include this on a list of alternatives to big banks seeing as they’re not exactly small, but if your intent is to find an institution other than Bank of America, Morgan Chase, Citigroup, and Wells Fargo, then these organizations may be a viable option.
A few advantages of online banks: they’re less likely to charge strange/new/increasing fees than traditional big banks, and interest rates tend to be higher. They also rarely charge ATM fees (although if you withdraw using a bank ATM, there will of course be a fee on the bank’s part). For some, the lack of physical transactions and one-on-one service might be a disadvantage, while others consider banking completely online a plus.
By all means, PayPal isn’t a perfect replacement for banking, and for many it simply isn’t possible. For my part, I honestly use my PayPal account more than my bank account. All money I earn is deposited directly, I pay most of my bills from my PayPal account, and I use their MasterCard-backed debit card far more frequently than my other debit card.
PayPal offers business accounts, personal accounts, and student accounts. They’re also opening a pop-up store in New York City to show off their upcoming offers and technologies, which TechCrunch reports will include location-based offers and making payments accessible from any device.
Some mutual fund companies offer customers money market accounts, although it should be noted that these are not insured against loss by the FDIC. A money market account usually requires between $500 and $5,000 to open, according to CNN Money, and may come with minimum balance requirements. In some cases, you may be able to write checks from the account.
Brokerages offer cash management accounts that work “like a combination bank/brokerage account, consolidating your investments with your day-to-day cash flow.” These accounts come with checking, credit card privileges, and a debit card. Annual fees for cash management accounts start at around $50, although those who have over a certain amount in their accounts may have their fees waived.
This is more for those who need to take out a loan and wish to bypass big banks. Social lending networks, including The Lending Club, Propser, and Zopa, are made up of members who act as lenders. You submit your business plan and request, they lend you the money with the agreement that they’ll get a set annual return over a specified period. Because you’re working with several lenders, the risk for each is minimized, and you get a fixed rate based on your credit score.
Think of it as playing Dragons’ Den online.
Maybe I’m stretching it a bit – if you do this in lieu of any sort of banking institution, it’s kind of the 21st century version of keeping all the cash you have to your name under the mattress.
Plastyc is a prepaid debit card provider; sign up online and your card will arrive in the mail. You can load up your card with up to $5,000 dollars; it’s welcome anywhere Visa is accepted. All account management is done online. Perhaps unsurprisingly, the original idea was to market these cards at teens and college students.
Earlier this year, Bloomberg reported that co-founder Patrice Peyret adjusted the company’s marketing plan thanks to the financial crisis, aiming to help anyone dealing with job loss or the housing market crash by offering affordable cards that are “as close to a traditional checking account as many of our customers will ever get.”