Is it better to go bankless?

I opened my first bank account when I was eight years old. It came with a plastic toy dinosaur, a small consolation prize for depositing my entire week's allowance.

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THE BACKGROUND:

I opened my first bank account when I was eight years old. It came with a plastic toy dinosaur, a small consolation prize for depositing my entire week's allowance. I didn't exactly have a choice in the matter; depositing the money was my parents' one stipulation for paying me an allowance in the first place. And at $20(!) a week for a short list of chores, I wasn't about to put up a stink about it. The truth is most of my friends were making half my salary for double the work. So I took my parents' generosity as a blessing, and made my weekly trips to the bank without contest. What I found out later was that dear old M&D weren't clueless about the going rate of an allowance. On the contrary, they were 100% clued in on teaching me the value of saving and managing my money.

Flash forward to today. Most people my age don't even carry cash. You can deposit a check simply by snapping a photo of it. You can transfer money with the click of a mouse. Translation: You no longer have to deal with your bank's little inconveniences (I'm looking at you, long lines). In fact, according to the Fidelity Viewpoints®  article, "Do You Really Need a Bank?" banks across the country are closing more and more branches because of high operating costs and lower customer traffic. Throw in a challenging economic and regulatory environment, and this could be just a tipping point of a downward spiral for banks. So what's the alternative? According to the Fidelity Viewpoints®  article, there could be opportunity in brokerage firms.

THE BREAKDOWN:

Historically, banks have been the go-to place for personal loan services, a way to establish credit, and a sense of comfort and tradition, but they aren't the only place to stash your cash. Brokerage firms offer:

  • FDIC-insurance. 2
    Fancy name, simple concept. Basically, it's insurance on your checking and savings accounts.
  • Cash control.
    Online and mobile banking have opened a lot of doors for brokerage firms, such as direct deposit, mobile deposit, and online and mobile bill pay—and maybe best of all, debit cards that offer cash rewards.
  • Easy investing.
    Some brokerage firms may offer credit cards that are linked to your brokerage account—which means you can automatically invest the cash rewards you earn on everyday purchases into an eligible IRA or college savings account. Talk about a no-brainer.
  • Freedom from fees.
    Who likes being hit with annoying ATM fees? No one. But here's the good news: Many brokerage firms are now picking up the tab by offering ATM reimbursement and other free services like checkwriting capabilities.
  • Trouble-free transfers.
    Many brokerage firms allow you to link your checking and other bank accounts to your investment accounts, giving you easy access to your cash whenever you need it.

THE BOTTOM LINE:

While brokerage firms may not give you a free dinosaur when you open an account, they do offer a bunch of great perks that some banks don't. And considering the challenging banking environment, making the switch now could make more sense than ever. But before you go bankless, consider all the pros and cons by reading the full Fidelity Viewpoints® article here.

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Topics:
  • Banking
  • Financial Planning
  • Banking
  • Financial Planning
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1. The Wall Street Journal, "After Years of Growth, Banks Are Pruning Their Branches," March 31, 2013.
2. FDIC insurance covers all deposit accounts, including checking and savings accounts, money market deposit accounts, and certificates of deposit. The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.
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