If you’re not a trusting soul, you may hate the idea of handing over your money to your local bank teller and watching it be whisked away. After all, what do you get in return? A piece of paper saying you have X amount of invisible dollars in the secret drawer known as your bank account. Then you shuttle that money around online or at the ATM to buy the things you need, all the while hoping that the numbers the bank provides you are correct.
As any Monopoly player knows, that Bank Error in Your Favor card doesn’t come up very often.
Full disclosure here: I am not a person who distrusts my bank, and I keep close tabs on my checkbook to make sure the numbers all line up. But I do know people who hate their bank and are looking for a better – or at least a just-as-good – way to handle their financial lives. If you’re one of them, here’s what you need to know about alternatives to traditional bank accounts before you dive in with both feet.
Most people’s first experience with Paypal was as the payment service used by eBay, which owned the company from 2002-2014. At first, having a Paypal account felt like keeping a little company store account for buying and selling on eBay, but it quickly grew to be useful in all sorts of online transactions. You probably got one because you needed it to buy something once, but since then Paypal has grown to provide lots of encryption and security elements as well.
If you live most of your financial life online, Paypal can make a lot of sense as a replacement for your bank account. Freelancers in particular like it for invoicing and accepting payment for their work instantly, so it eliminates the need for clients to send paper checks. Paypal also offers its own rewards credit card and a new person-to-person payment service that eliminates the need to deal with cash among friends.
If you’re thinking that Paypal sounds like a bank, be careful. First, Paypal charges a fee off the top of money you receive for goods or services, which could wind up being more than the ATM and checking account fees you rack up at your bank. Second, you get a lot of cash-free convenience with Paypal, but your funds are not FDIC-insured like they are at a bank. That means that if your bank fails, the federal government has got your back and will give you your money. If Paypal fails, you’re SOL for the balance.