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.
2. Google Wallet
If you’re fine with the idea of invisible money floating from account to account but really hate all the fees your bank charges – think ATM fees, minimum balance fees, astronomical paper check prices, etc. – Google Wallet might be your new best friend. This peer-to-peer payment app lets users send money to anyone they want, even if that person doesn’t have the app.
The best part about Google Wallet is that it’s free. There are no fees at all to send or receive money, so it feels more like handing cash to a friend than Paypal, which is happy to scrape a few pennies off the top of that handshake. Freelancers and landlords can also use Google Wallet to accept commercial payments without a fee, though they have to be registered as “sole proprietors” instead of corporations with the IRS at tax time.
The downside of Google Wallet? It doesn’t let you go bank-free. You’ll still need a bank account to connect to the app as a source of funds, but you can avoid ATM fees by using your phone to pay friends and make purchases at stores that allow you to tap your phone at the point of sale.
If you’re more of a “get the government out of my wallet” type, Bitcoin may be for you. Bitcoin is a totally different currency that’s not tied to any country’s money system. Instead, it’s a virtual currency that you buy online and can use for some online transactions – or as an investment, just like you’d invest in gold or the Yen.
Bitcoin is particularly useful for international transactions, since you don’t have to worry about the exchange rates fluctuating between countries. They also have very low fees to use, so you’re likely to save on bank fee associated with international transactions. Bitcoin also promises strong identity protection, since there’s no credit car or bank account number for thieves to steal.
The downside of Bitcoin is that the market can be quite volatile. You can buy Bitcoins from over 20 different exchanges in the U.S. alone, and each has its own fees and daily valuation. That means that you’ll have to do a good amount of research to get the best rates. You might also invest in Bitcoins on a good day, only to find out the next month that their value is down – leaving you with less money than you thought you had. It’s a complex system that can be hard for newbies to get the hang of, so it’s best to start small instead of going all-in.
If you’ve ever been frustrated by the intense process of getting a loan from your bank and want to avoid pawn shops and payday lenders, an online peer-to-peer lending program might be just the thing you’ve been looking for. Prosper allows users to sign up and borrow money directly from a community of small investors without going to the bank. Your interest rate will depend on your credit score, the amount you borrow, the purpose of the loan and the length of the term, and usually many investors will fund your loan. You make payments to Prosper instead of to the bank, and the company divvies up your payment among the investors.
For investors, signing up on Prosper means getting to pick and choose which loans you fund so you can manage your risk and rewards. You get to invest without going through a bank or a stockbroker, and you can put your money into causes you believe in, such as funding student loans. You’ll have to do more research on your own to get good results, and your money is not at all insured, but many investors enjoy the hands-on nature of this type of investing, especially as an additional layer of portfolio diversification.
The Bottom Line
If you’ve been dying to kick your bank to the curb for some reason, there are plenty of ways to do it. Just be sure to research any fees or hidden costs, and be sure you understand whether your investments are guaranteed or insured. A trial period for a new service is always a good idea to make sure you like it. Go slow and report back on your results.
Anti-bank? How do YOU keep track of your money? Tell us in the comments below!