If you’re tired of getting paltry interest rates on your savings accounts or being charged fees for every little transaction, you’re not alone. Fortunately, there are alternative banking options available that offer better rates and more flexibility than traditional banks.
In this article, we’ll explore nine different banking alternatives that can help you earn more money on your savings, reduce fees, and manage your finances more efficiently. From online banks to credit unions, we’ll highlight the benefits of each option and help you determine which one might be the best fit for your needs.
So, whether you’re looking to switch banks, earn more interest on your savings, or simply explore new financial options, read on to discover nine banking alternatives that pay better.
Contents
Online banks
Opting for online banks can be an excellent substitute for conventional banks with physical branches. They typically provide savings accounts and certificates of deposit (CDs) with better interest rates, minimal charges, and user-friendly mobile applications. Ally Bank, Chime, and Marcus by Goldman Sachs are among the most popular online banks.
Credit unions
Credit unions are owned by their members and operate on a not-for-profit basis. They usually offer more favorable interest rates on loans and savings accounts compared to traditional banks. Credit unions may also have lower fees and provide customized customer service. Consider exploring Alliant Credit Union or Navy Federal Credit Union as potential options.
High-yield savings accounts
To increase the interest on your savings, contemplate opening a high-yield savings account. Such accounts usually provide considerably higher interest rates than traditional savings accounts. However, they may have higher minimum balance requirements or limited withdrawal options. Some well-known choices to consider include Discover Bank and American Express Personal Savings.
Money market accounts
Money market accounts are comparable to high-yield savings accounts, but typically provide even higher interest rates. They may require higher minimum balances and have more limitations on withdrawals. Explore options such as Sallie Mae Bank or Barclays for potential choices.
Cash management accounts
Cash management accounts are a recent banking option that merges the advantages of checking and savings accounts. They generally offer better interest rates than regular checking accounts and also come with features like a debit card and check-writing capabilities. SoFi Money and Wealthfront Cash Account are among the frequently chosen alternatives.
CD laddering
CD laddering is a strategy that involves opening multiple CDs with different maturity dates. This can help you earn higher interest rates while still maintaining some liquidity. For example, you might open a 1-year CD, a 2-year CD, and a 3-year CD, so that each year you have a CD maturing and earning interest at a potentially higher rate. Check out options like CIT Bank or Capital One 360.
Peer-to-peer lending
Peer-to-peer lending refers to lending money to individuals or small businesses via an online platform. This type of lending usually yields higher interest rates than conventional savings accounts, but it also comes with a higher risk. LendingClub or Prosper are worth exploring as potential options.
Robo-advisors
Robo-advisors are internet-based investment platforms that use algorithms to oversee your investments. They generally charge lower fees compared to traditional investment advisors and may provide higher returns than savings accounts or CDs. Betterment or Wealthfront are potential choices to consider.
Real estate crowdfunding
Real estate crowdfunding involves investing in real estate projects through an online platform. You can earn returns on your investment through rental income or property appreciation. This option carries more risk than traditional savings accounts or CDs, but may offer higher returns. Check out options like Fundrise or Roofstock.
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FAQs
What is an online bank?
An online bank is a financial institution that operates entirely online, without any physical branches. Online banks typically offer higher interest rates on savings accounts and lower fees than traditional banks.
How do high-yield savings accounts work?
High-yield savings accounts are akin to conventional savings accounts, but with significantly higher interest rates. They usually demand higher minimum balances and may have limitations on withdrawals.
What is a cash management account?
A cash management account is a hybrid of a checking and savings account that offers higher interest rates than traditional checking accounts. Cash management accounts typically come with a debit card and check-writing capabilities.
What is CD laddering?
CD laddering is a strategy that involves opening multiple CDs with different maturity dates. This can help you earn higher interest rates while still maintaining some liquidity.
What is peer-to-peer lending?
Peer-to-peer lending entails lending money to individuals or small businesses through an online platform. This investment option can potentially provide higher interest rates than conventional savings accounts, but also carries a higher level of risk.
What are robo-advisors?
Robo-advisors are online investment platforms that use algorithms to manage your investments. They typically offer lower fees than traditional investment advisors and may offer higher returns than savings accounts or CDs.
What is real estate crowdfunding?
Real estate crowdfunding involves investing in real estate projects through an online platform. Investors can earn returns on their investment through rental income or property appreciation.
Are online banks safe?
Certainly, online banks are considered secure and safe. They are held to the same standards and safety measures as traditional banks, and commonly implement encryption and other security protocols to protect customer data.
Can I use online banks for all my banking needs?
Yes, many online banks offer a full range of banking services, including checking accounts, savings accounts, loans, and credit cards. However, some online banks may have limitations on certain services or may not offer physical branches for in-person services.
Conclusion
As evidenced, numerous banking alternatives exist, providing higher interest rates, lower fees, and more flexibility than conventional banks. Whether it’s online banks or credit unions, high-yield savings accounts, or robo-advisors, there’s an option for every individual.
Before making a decision, it’s essential to conduct thorough research and compare various alternatives. Take into account factors like interest rates, fees, minimum balances, and customer service. Search for feedback from other customers and be on the lookout for any warning signals, such as a track record of fraud or inadequate customer service.
Although it may seem intimidating to switch to a different banking option, it can be an excellent way to reduce costs and increase savings. The proliferation of online banking and fintech startups has resulted in a larger variety of choices than ever before.
Ultimately, determining the ideal banking alternative for you will be contingent on your specific requirements and financial objectives. By examining various options and assessing their characteristics, you can locate a banking alternative that meets your needs and enables you to attain your financial aspirations.
