Once upon a time, banking was easy. You dropped off your money in your friendly neighborhood savings and loan, knowing that it was safely insured by the FDIC, and that you would be paid a small amount of interest for letting the bank use it. Over time, your savings would increase, your interest would compound and you would build a nice little nest egg, ready to be used for retirement, a down payment, a college education, or whatever you might want. Your bank was secure and friendly, a great place to park your money with people you trusted.
Over the last few years, though, the smooth banking relationships of yesteryear have disappeared. Interest has become a thing of the past, replaced by fees and surcharges. The bank account -- the first step on the road to financial adulthood -- has become a shortcut to high-interest credit cards and, all too often, crushing debt. The CARD Act of 2009 cut out a lot of hidden fees and other financial traps, but in the years since then, banks have figured out ways to introduce dozens of other tiny fees, chipping away at their customers in a sort of death by a thousand cuts.
In the past, I've written about low-cost banking alternatives, including Credit Unions and Walmart cards. Recently, though, another option has cropped up. A new company, Simple, is a sort of online bank crossed with a financial literacy site. On the banking side, it functions much like a traditional (read: pre-fee) bank; accounts are held by FDIC-insured partner Bancorp. Simple issues Visa debit cards, which its customers can use for free at any store that takes Visa cards and any of the 50,000 ATMs in the Allpoint network. As an added benefit, Simple doesn't charge for out-of-network ATM transactions, although the ATM owners probably would.
But that's where the similarities to traditional banks end. Simple doesn't have any brick-and-mortar locations; its customers process most transactions through smartphones. To deposit a check, Simple users sign it, take a picture of it and post the image to their accounts. The bank then verifies the check and posts the money to the user's account. After a few days, the user is supposed destroy the original check.
Fees are another place where Simple differs from a standard bank. Most transactions are free, although premium transactions like stopping checks and getting treasurer's checks come with a charge. For that matter, some transactions that would be free at a traditional bank incur a slight charge at Simple. For example, if you want to walk into a bank and withdraw $100 in cash, Simple will charge $1. Similarly, while Simple makes it easy to access bank records online, getting a paper copy of a bank statement costs $5.
Another place where Simple differs from a traditional bank is in its money management tools. Its suite of budgeting programs, which is somewhat similar to those of Mint.com or other online budgeting sites, is directly connected to its accounts and is available free of charge.
Ultimately, Simple is a great choice -- for a certain type of bank customer. It assumes that its users have smartphones, are comfortable managing their money online, don't use many traditional bank services, and don't mind not having physical contact with their bank. For traditional bank users, it might not be ideal, but for people who live their lives online and are sick of paying bank fees, it may be a simply perfect banking solution.
Bruce Watson is a DailyFinance's Savings editor. You can reach him by e-mail at email@example.com, or follow him on Twitter at @bruce1971.
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