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 micro-savings app?
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 basics 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 (fee-free overdraft up to $100), 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 of days, for “processing,” but Chime processes it immediately when you set up a direct deposit and can even get it to you 2 days early.
Unfortunately, the Savings Account does not accrue an appreciable interest rate. As of April 2020, the annual percentage yield on the Chime Savings Account is only 1.00% APY.
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 only missing ingredient, which they plan to introduce, is photo check deposit via their 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
They used to offer $5 to open an account but no more, it's not as nice of an incentive anyway compared to the hundreds of dollars some banks will give you. Getting your paycheck two days early and no fee overdrafts up to $100 are good perks.
The only big disadvantage I see is that the Savings Account doesn't offer much interest, which is far below other online savings accounts. It's nice that you get automatic savings 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 debit card – Chime does this.
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 few perks in return.
Considering they don't charge you anything else, they're an attractive 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).
Recent Changes as of November 2019
As I mentioned in the yellow box above, Chime recently took away the rewards on their debit card and the $5 sign up bonus. The bonus was never a big influence on whether or not the account made sense but losing rewards was a big blow. We originally had Chime scored at an 85, it wasn't a 90 because the interest rate was so practically non-existent.
Without their cash back debit card, I'm not really sure where Chime fits in the marketplace. You're getting a savings account with roundups on debit transactions to help you save? Your paycheck two days earlier? I'm not really sure where the value is. That's why the score was lowered to 75.
Once you take away the rewards, Chime becomes an online checking account that deposits your paycheck two days earlier than a traditional bank.
If I needed to pick a primary bank, I'd rather open an account at Ally Bank, get 1.10% APY on my savings account, and just get my paycheck as normal. Ally Bank has no minimums, no maintenance fees, and has an app that lets you do everything you need (like deposit checks through the mobile app).
If you really want a microsavings app, you could give Acorns a try. They play more on the investing side and they have fees, but they're worth a look.