What's New With Checking -- 2020
Why open a checking account, and how to find one for you?
Operating in cash during a pandemic became difficult pretty quickly. Although anecdotes suggest people were hoarding cash initially, it has been increasingly difficult to use, as lack of circulating currency means stores are often short of coins. During the pandemic, half of Americans surveyed said they use contactless payments. Furthermore, stimulus checks and other government benefits come much faster if they are directly deposited in a bank account. Several articles offered suggestions for selecting and opening a bank account.
Fourteen million Americans do not have a bank account. Instead, they use check-cashing services and prepaid debit cards. They incur fees for both of these services. But banks go way beyond cashing checks and offering debit cards, like security, and establishing a relationship with a bank is important to accessing other financial products. But as financial educators, we know that.
The suggestion is to look for a community bank or credit union when looking for your first checking account. Then it is a matter of considering which checking account features are most important to you.
What if you can’t get a checking account because of too many overdrafts? Bankrate explains the ChexSystems in one article, and explains in more detail what to do if you have trouble opening a bank account because of this in another article.
(Note: I have used a website called Find a Better Bank to demonstrate all the various features and services to consider when choosing a bank in any geographic area. Once you work through a few screens selecting your preferences for services and typical usage, the results will appear with the associated fees for comparison. This is also helpful in convincing those unhappy with their bank accounts to switch, which really is not that difficult to do.)
A personal finance writer at Business Insider takes you through her decision to change banks. She used the behavioral finance term “status quo bias” to explain why, even though she was unhappy with her bank, it took her ten years and compiling an article on the best banks to finally make the change. She says it took her only three minutes, which suggests she was able to do everything online.
What if you have trouble opening up a bank account?
ChexSystems collects information from banks on customers and was described as the equivalent of a credit bureau for banks. This is what banks use to assess the risk of taking you on as a customer. They check this system like a potential lender would check your credit history and score. A negative consumer disclosure report might be generated by any of the following:
- Unpaid negative balances (as a result of overdraft fees, for example).
- Bouncing checks.
- Suspected fraudulent activity.
An accumulation of overdraft fees is the most common reason a report is generated. Like your credit history, you can request your ChexSystems report annually for free, and again under certain circumstances (like being turned down for a new account.) The information may help you figure out what happened, and enable you to straighten the situation out with the financial institution. If you think there are errors you would contact ChexSystems to correct them. (This step-by-step guide might be helpful.)
This article also included summary statistics from the Fed’s 2019 Federal Reserve report on the economic well-being of U.S. households:
“six percent of adults had no bank account in 2019, but the problem was more widespread among racial and ethnic minorities, with 14 percent of Blacks and 10 percent of Hispanic adults unbanked. Another 16 percent of U.S. adults were considered underbanked because while they may have a bank account, they still used expensive alternative financial services to manage their money.”
To summarize, if your application for a checking account is denied, call the bank and find out why. Request a ChexSystems report and if possible, clear the problem. If there is an error, follow the steps to correct it. You can shop around for a bank that is willing to offer you a second-chance account, which will likely be restricted and may carry a fee, but it is a good place to start (and cheaper than check-cashing services, payday lenders and prepaid debit cards). It is suggested that you call around to banks and ask if your particular issue would be a problem with that particular bank. Not all banks follow the same playbook. A community bank or credit union may be more willing to help you out. Applying in person may be helpful, especially if you are asking for one of those second-chance accounts.
New Players/New Banks/New Types of Accounts
Google is getting into the checking account market. They recently announced that they now have eight banks signed on to this venture to launch next year, where Google provides the user interface tied into it’s Google Pay platform, and the banks provide the backend infrastructure and FDIC insurance on the accounts. The banks include the bricks and mortar powerhouses like Citibank, as well as a range of digital and community banks. What’s in it for the banks? It is unclear who will earn what from whom on these accounts, but think of the value of a Google branded product in their portfolio. (The Verge) (American Banker)
Also getting into the checking account arena in 2021 is Goldman Sachs’ consumer arm, Marcus. Marcus savings accounts have attracted over $60 billion in deposits, and its Apple credit card has done well. Checking is the obvious product to add to their consumer lineup next. (Forbes)
Looking for a digital bank that focuses on the community? (Forbes) reviews Quontic Bank, with its headquarters in New York, is designated as a Community Development Financial Institution (CDFI), focusing on lending to economically distressed and underserved individuals and communities.
Do you think anyone researches the investments their banks make to determine if it is climate friendly? If you are looking for a bank that will make an impact on the environment, look no further than Bank of the West. You can open a “1%for the Planet” account.. The debit card they issue is made of biodegradable and compostable material. You can go online and check the carbon footprint of each of your purchases. The bank charges no fees. But the real kicker is that 1% of the revenue from these accounts goes to an NGO fighting climate change. This subsidiary of BNP Paribas (Paris) has contributed $265 million so far. (TriplePundit)
There is a new fintech player in the checking account world early access to a paycheck. Rellevate is targeting hourly workers with its new product. The deal is that the $9.95 monthly fee allows the account holder up to 4 advances per month, which are deducted from their paycheck. There are no other additional fees or interest charged on the advances. The bank is also offering other services to facilitate payments quickly for customers at the end of the year. I have always said that those with the least money have to pay the most for financial services, but this company seems to be turning that around. The marketing to companies to participate is aimed at reduced turnover because they can better manage their money. (Forbes)