Two years ago, Mark Cuban-backed Dave launched a mobile app that plugged into existing bank accounts to help young adults avoid overdraft fees. Now, the Los Angeles startup wants to also replace the checking account as part of the experience.

On Tuesday, the fintech firm unveiled Dave Banking, a digital-only deposit account that is designed to solve young adults’ cash-flow challenges. In addition to the features it already offers on its core mobile app, the new bank account option will give users an opportunity to build their credit.

Dave represents a growing trend of nontraditional firms, like Chime and Empower, that are courting young adults with alternative big bank products.

The launch comes on the heels of JPMorgan Chase deciding to shut down Finn, its millennial digital bank account, as well as Bank of America boasting it’s on track to surpass 1 million accounts this month on its no-overdraft-fee account designed for college students.

Of Dave’s existing 3.5 million app users, 500,000 are on the waitlist for the bank account and can now sign up.

Inside the Dave Banking account

Dave Banking comes with perks that you might find at a typical bank — and some you likely wouldn’t.

FDIC insurance, free ATM access, no fees and more

While Dave designs the digital experience, your money is deposited and FDIC-insured at its partner bank, Evolve Bank & Trust, which has bank services in Arkansas and Tennessee. As a customer, you will get a debit card that connects to an app and access to your money for free at 30,000 ATMs using the MoneyPass ATM network.

There are no monthly fees for Dave Banking. It makes money on the interchange revenue it makes from customers’ card swipes.

Then, the digital-only account gets even more interesting.

Credit-building feature

While some banks give you a bonus for setting up a direct deposit into their checking account, Dave Banking will report your rent payments to the credit agencies through its partner, CreditPop. Soon, the startup will also report customers’ utility payments. If you are making timely payments, this feature can help you establish credit.

Interest-free cash advance

Like some other bank accounts, Dave Banking won’t let you overdraft your account. But it offers an alternative solution to low-balance days. Customers can get an interest-free, $100 advance into their bank account within seconds to cover the times when bills are due, balances are inching closer to zero and payday is still days off.

Jason Wilk, co-founder and CEO at Dave, says consumers need another option when their checking account bans overdraft fees.

“If you need to purchase something, it’s great you are not going to charge me a fee,” Wilk says. “But if you just reject all of my transactions, that actually puts me in a real disadvantaged position.”

To Wilk, the small advance helps consumers cover a one-off purchase, like gas or groceries, when they don’t want to use a credit card.

“Dave will be the first account that really reinvents overdraft by allowing people to have an additional $100 at any time to make these everyday purchases, and it’s a real-life saving proposition for the majority of Americans,” he says.

Since it’s your checking account, Dave Banking will know when you get paid next and it will take back the funds it advanced you on that calendar date — an experience the core Dave app has offered all along.

A good option for new savers

If you’re just starting off, Dave Banking is a good neobank option to consider for your primary bank account. The startup’s average user age is 22.

In an ideal world, you would not need to advance a portion of your next paycheck into your checking account to afford, say, gas or groceries. In reality, millions of Americans live paycheck-to-paycheck and need an option to cover tight times. However, be cautious. Getting access to money early means you will have $100 less in your next paycheck.

Also, make sure to review the product’s fine print when deciding if the bank account is for you. Pay special attention to how you plan to fund the account. On Dave Banking, it’s free to fund your account if you make a direct deposit, but it will charge you for other funding methods.

If you want to try the experience before signing up for an account, you can. The core Dave app will continue to be available to help you budget, find a side hustle and avoid overdraft fees so consumers will have options — no bank account from Dave required.

“People can come and try us out for a year and then decide to open a bank account,” Wilk says. “They can do it never. Or they can do it the same day that they join. It’s a very flexible model.”

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