What if I told you there was a bank that combined the features of a high yield online savings account with the automatic savings of a microsaving app?
What if I told you they gave you a debit card with cashback rewards, access to 24,000 no-fee ATMs, and you could pay your friends?
Plus they would give you $5 to open an account?
That's Chime. If you were building a bank from the ground up, these are the features people care about.
Who is Chime?
Before we get ahead of ourselves, let's get the paperwork out of the way first.
Chime white-labels the bank services of The Bancorp Bank, the same company that runs the banking services for a litany of private label banks. The Bancorp Bank is FDIC #35444 and has been actively insured by the FDIC since July 2000.
By “white-label” what I mean is that all the legal aspects of running a bank are handled by Bancorp Bank (NASDAQ: TBBK), Chime layers their services, their cashback, their apps, etc. on top of what Bancorp Bank offers. While it uses the banking services of The Bancorp Bank, Chime builds its features and perks on top of the engine they provide.
The Bancorp Bank powers 100+ private-label non-bank partners and processes $232 billion annually. They're a publicly traded company and you've probably never heard of them because they run behind the scenes of other banks. They've been around since 1999, are FDIC insured, but have zero branches. They're entirely private label.
What does Chime offer?
Chime offers a savings and checking account (checking is called a Spending Account) as well as a Chime Visa Debit Card. There are no monthly minimum balance requirements, no monthly fees, no overdraft fees, as well as a fee-free ATM network that includes over 24,000 locations (they use the MoneyPass ATM network).
One other nice feature – instant processing of your payday check. Some banks hold it a couple days, for “processing,” but Chime processes it immediately when you set up direct deposit.
Unfortunately, the Savings Account does not accrue an appreciable interest rate. As of this writing in February 2018, the annual percentage yield on the Chime Savings Account is only 0.01%.
If you activate Automatic Savings, they round up every debit card transaction and transfer that money from your Spending Account into your Savings Account. You can also have it automatically transfer 10% of every paycheck into your Savings Account.
The Chime debit card also gives you cash back rewards in a variety of categories such as restaurants, groceries, various bills, etc. These categories change so you need to check the Chime app to see what the latest cashback rewards are. They are deposited the next day.
The only missing ingredient, which they plan to introduce, is photo check deposit via their own app. You have to deposit it via a third party app. All other banking features you'd expect are in there (including bill pay electronically as well as the mailing of a check).
Pros and Cons
$5 to open an account is nice – not the hundreds of dollars some banks will give you but when you consider this is a savings tool wrapped around a regular bank account, it's not bad.
And the rewards card is also pretty attractive too because you rarely see debit cards offer this type of reward.
The only big Con I see is that the Savings Account doesn't offer much interest (0.01%), which is far below other online savings accounts. It's nice that you get automatic savings as well as cashback rewards on the debit card, but this low-interest rate can be a deal breaker for some. Check deposit via a third party app is also not ideal but hardly a deal breaker.
They also don't offer some familiar deposit products like Certificates of Deposit or loan products like a mortgage or car loans. No biggie though.
They use the MoneyPass ATM network and their 24,000 ATMs… but go outside of it and you will be charged $2.50 per transaction.
Who is Chime for?
It's hard to overlook the low-interest rate but if you want a simple, straight-forward bank with automatic savings, no fees, and a reward debit card – Chime has you covered.
They get good marks on their app and their user experience, the only thing dragging down their rating is the interest rate. To be fair though, the difference between 1% and 0% is minor. I'd prefer 1% but you get a ton of perks in return.
Considering they don't charge you anything else, plus they give you debit card rewards (rare), they're a solid option if you like automatic savings but don't want to pay $5/mo to the likes of Digit (depending on how much you save, you could be surrendering that in interest).
I give them an 85 because of the nearly non-existent interest rate, otherwise they'd be a solid 90.