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Does anyone here use a "challenger" (online-only) bank service?
Posted by: deckeda
Date: September 29, 2021 12:24PM
And if so, how do you like it?

Wikipedia has a definition from the UK perspective but the idea is the same everywhere: reduced service and cost. Just knock everything down to strictly transactional services, and only online.

They're also called "neobanks" and "fintech" (financial technology) banks ... this is not Venmo or some other person-to-person money transfer. These use debit cards instead of checks written.

I'm not so much looking for a discussion of why not to use one of these but will describe them as I understand them to be. I'm aware you can't write checks or go into a bank branch "for any reason, including ones I can't think of."

But in looking around I noticed these entities suffer from an identity problem. Many are marketed/advertised/explained away as "pay day apps" for one salient feature they're known for: The ability to make direct deposits available 2 days before payday. The idea is you can spend some or all the money and on the real payday, the balance of what's leftover posts "for real."

This is not a trick and not a loan: All major banks receive your paycheck and hold on to it, only posting it on payday to "ensure" it posts on the correct day. For whatever reason paying you "early" is both potentially confusing, "wrong" and whatever else. (It's not as if companies block banks from releasing too early.) Or perhaps they can legally earn interest on your paycheck, I don't know.

At any rate the "payday" feature isn't why I'm interested; I really am looking for no or low fees for another account that has a separate purpose from our main checking account. And no, there are no --- zero --- credit unions here. Signing up for one out of my area is akin to just going with one of these, but at a lower cost probably.

How they appear to work is they use a "real" partnering bank and act as a front, very much like how a MVNO operates ... a thing we've talked about for years here.

Much of this circles back to branding and marketing. Verizon wants to position themselves as a premium service, yet has no problem selling you service from Visible instead. It's dumb. Similarly, there's no reason why Citi or Chase or BofA couldn't do this (and they might, for all I know) except that they don't.
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Re: Does anyone here use a "challenger" (online-only) bank service?
Posted by: Robert M
Date: September 29, 2021 12:34PM
Deck,

Seems like they're creating a new category of financial institution unnecessarily. Just call it a financial institution and be done with it. Any number of financial institutions are suitable, i.e. bank, credit union, online only, local, etc. Heck, even a brokerage like Fidelity might be a viable option. If you are eligible, a checking account with USAA will do the job nicely.

Robert
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Re: Does anyone here use a "challenger" (online-only) bank service?
Posted by: graylocks
Date: September 29, 2021 02:42PM
If I understand what you're describing I have a number of accounts.

USAA
CapitolOne
Ally Bank
Fitness Bank
Fidelity Investments

Plus I use a credit union and BOA which is where most of my active banking like direct deposit and billpay are done.

They all work fine. None of them do that early Payday thing as far as I know.



"Success isn't about how much money you make. It is about the difference you make in people's lives."--Michelle Obama



Edited 1 time(s). Last edit at 09/29/2021 02:43PM by graylocks.
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Re: Does anyone here use a "challenger" (online-only) bank service?
Posted by: mikebw
Date: September 29, 2021 02:45PM
Quote
deckeda
Many are marketed/advertised/explained away as "pay day apps" for one salient feature they're known for: The ability to make direct deposits available 2 days before payday. The idea is you can spend some or all the money and on the real payday, the balance of what's leftover posts "for real."

This is not a trick and not a loan: All major banks receive your paycheck and hold on to it, only posting it on payday to "ensure" it posts on the correct day. For whatever reason paying you "early" is both potentially confusing, "wrong" and whatever else. (It's not as if companies block banks from releasing too early.) Or perhaps they can legally earn interest on your paycheck, I don't know.

I don't have anything to add to your actual question, but this part caught my attention as Capital One recently started doing the above, depositing my paycheck on Wednesday (today!) instead of on Friday. I'm sure I don't understand the mechanisms either, but they claim the following:

Quote
Capital One
Wondering why your deposit was posted early? This is a free service we started offering to eligible Capital One checking accounts. Now we’re able to make some of your deposits available up to 2 days earlier than usual.

Keep in mind—this doesn’t guarantee early availability of your deposits in the future. If we don’t post your deposit early, you should expect it to arrive when it normally does.
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Re: Does anyone here use a "challenger" (online-only) bank service?
Posted by: RgrF
Date: September 29, 2021 04:55PM
T-Mobile has their own on-line bank, it even pays a modest amount of interest. In conjunction with our other banks and cards, we've used it for the past year or so, it seems to run smoothly enough.
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