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Chime provides fee-free online banking services through a well-received mobile app.
Money expert Clark Howard likes online-only banks because they don’t have many fees and carry low (or zero) minimum balance requirements.
Chime offers a number of rich features, a competitive interest rate and a checking account with direct deposit, a debit card and a free ATM network.
Company Name | Chime |
---|---|
Company Type | Financial software company (banking services) |
Key Features | Competitive interest rate, automated savings, early access to direct deposits |
Downsides | Lacks branches, joint accounts and loans |
Best For | Anyone OK with banking online, especially the unbanked and those with a negative banking history |
Founded in 2013, San Francisco-based Chime considers itself a financial services software company. But for all practical purposes, it operates similarly to a fee-free online bank.
Technically, it doesn’t have a bank charter. Instead, it partners with Bancorp Bank and Stride Bank, which are FDIC members.
Chime made its public debut on the Dr. Phil show in 2014. The company has raised about $2.3 billion and was valued at $24.3 billion in its Series G round in August 2021.
“Nobody wants to go into bank branches, nobody wants to touch cash anymore, and people are increasingly comfortable living their lives through their phones,” Chime CEO Chris Britt told CNBC in September 2020.
That type of success has attracted scrutiny from regulators. At the behest of the California Department of Financial Protection and Innovation, Chime agreed to stop using the term “bank” in its marketing in May 2021.
A Chime checking account, formerly called a “spending account,” is the company’s equivalent of a bank checking account — although you won’t be getting a checkbook.
Account holders get a Visa debit card and access to online banking services through Chime’s mobile app.
A Chime Checking Account is an FDIC-insured deposit account. It can receive direct deposits. It supports pre-authorized withdrawals and ACH transfers. Chime also offers free transactions and free person-to-person transfers. It’s compatible with Apple Pay, Google Pay and Samsung Pay.
Customers can withdraw money from Chime via the MoneyPass and Visa Plus Alliance ATM networks (60,000+ ATMs).
Chime allows customers to make deposits via:
The online bank challenger doesn’t offer loans or products such as Certificates of Deposit and money market accounts. It makes most of its revenue when its customers use its debit or credit cards.
Chime is online-only, so it doesn’t feature brick-and-mortar locations. Free from the overhead expenses of operating physical branches, Chime passes along those cost savings to customers. It doesn’t charge monthly or overdraft fees and also doesn’t require a minimum deposit.
Clark is a huge fan of the online banking model: He thinks many people overestimate their need for physical bank locations.
You must open a Chime Checking Account before you can open a Chime Savings Account.
As of October 2022, the savings account pays 2.0% APY. Banks are increasing their savings account interest rates across the board, although not in any sort of predictable order. It wouldn’t be surprising for Chime to raise its interest rates again sometime before 2023.
Chime is one of my eight best high-yield online savings accounts in part due to that competitive interest rate.
Clark advocates for automated savings, which aligns well with Chime. The online challenger of traditional banks offers several cool features that encourage automated savings.
Chime is a financial software company, so it makes sense that it is feature-rich relative to traditional banks. Here are the notable features Chime offers.
SpotMe®: In most cases, if you try to charge an amount that exceeds your account balance, Chime will simply decline the charge. That’s in line with Clark’s philosophy on overdraft protection. However, if you do manage to get a negative balance, the SpotMe feature allows you to avoid overdraft fees by offering protection up to $200. You must make at least $500 in monthly direct deposits to qualify. Chime will reimburse itself when you make your next direct deposit.
Early Access to Direct Deposits: Fill out some paperwork and you can get your direct deposit pay up to 48 hours early via your Chime Checking Account.
Save When I Get Paid: This feature automatically slides 10% of any direct deposit of at least $500 straight into your Chime Savings Account.
Savings Round-Ups: This automatically rounds up your debit card purchases to the nearest dollar and deposits the change into your savings account.
Chime Checkbook: Chime will create and mail you already filled out paper checks at no charge. The money gets pulled from your account when Chime drafts the check. Your limits are $5,000 per payment and $10,000 per month.
Secured Chime Credit Builder Visa ® Credit Card: Chime’s credit card is designed to help consumers build their credit. For example, your “credit limit” is based on the amount of money you transfer from your checking account to your Credit Builder account. You can charge only up to that amount, ensuring you’re always paying off your credit balance each month.
Visa Zero Liability: Chime issues Visa debit cards. Visa’s policy ensures cardholders aren’t responsible for unauthorized charges. You can instantly block transactions on your Chime debit card from the app.
Here are some of the biggest benefits Chime offers:
Here are some of Chime’s biggest downsides:
What demographic does Chime appeal to most? That’s a tricky question. Chime definitely caters to digital natives who have never had a traditional bank account or people who have negative banking histories.
But it’s a great option for anyone open to banking through an online-only company.
You’d do well to consider Chime if you:
To the last point, most traditional banks use their own equivalent of a credit score, called ChexSystems, to decide whether to let you open an account. If you’ve had trouble opening a traditional bank account due to past issues, Chime — a “second chance bank” — could work for you.
In 2021, there were several media reports and discussions in places where people congregate online that Chime abruptly closed some customer accounts. Possibly as a fraud prevention measure.
Some affected account holders reported difficulty contacting Chime’s customer service and said they were unable to access their funds for at least a period of time.
Keep reading to learn about alternatives to Chime.
Are you interested in an online bank, but Chime just doesn’t seem like the best fit for you?
I wrote about the best online banks for Clark.com. Among my favorite choices is Ally Bank, which is similar to Chime in terms of its features, a competitive interest rate and well-designed app. And unlike Chime, Ally supports joint accounts.
Another one of my favorites is Capital One, which I’ve described as the ultimate jack-of-all-trades of online banks. Capital One’s banking option doesn’t necessarily market itself around a singular feature, but it’s extremely difficult to find a weakness.
If you want a joint account, physical branches or need a loan, Chime won’t meet your needs.
But if you’re unbanked, aren’t able to open an account with a traditional bank or simply want to bank with a no-fee, mobile-optimized online company, Chime is one of the best choices you’ll find.
Chime is a financial technology company, not a bank. Banking services provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC. Chime FAQs.
This post was last modified on March 29, 2024 8:36 am
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