With the coronavirus spreading like wildfire, nothing is the same in our new socially distant world, not even the way we bank.
Folks used to interacting with tellers may be limited to doing so through a drive-up window. And for many account holders, their nearest branch or financial center is temporarily closed. So banks are encouraging customers to use digital channels instead.
While plenty of Americans are comfortable using their bank’s mobile and online features, some may be struggling. If you’re finding that the experience isn’t as seamless as you hoped it would be, perhaps it’s time to consider opening a new account with another bank.
As COVID-19 cases continue to increase, here are five other reasons to apply for a new savings or checking account.
1. Other banks may offer more support
Banks across the nation have stepped up to help customers impacted by the coronavirus. But they’re not all offering the same form of assistance. Some have said broadly that they will help customers who contact them, while others have waived fees and penalties for customers across the board.
Ally Bank, for example, said it’s waiving overdraft and excessive transaction fees until July 18. It also won’t charge customers for expedited shipping of debit cards or checks. Through May 8, Citi has waived monthly maintenance fees for retail banking customers and is allowing account holders to cash out CDs without incurring an early withdrawal penalty.
If you’re frustrated with the way your bank has responded in light of the coronavirus or you’re noticing other banks are offering more helpful benefits, consider whether it makes sense to open a new account elsewhere. Just consider that you’ll likely have to keep the account open for a while, so it should be a good fit for your lifestyle longer-term.
2. Earn a cash bonus
Many big and regional banks — and some online banks as well — offer new customers a bonus for opening a checking or savings account. Depending on the bank, bonuses can range anywhere from $100 to $400, or more. You won’t get rich solely by applying for a new account. But if money is tight right now, an extra $200 can help out.
The catch, of course, is that you won’t qualify for a bonus without jumping through a few hoops. You may have to transfer a certain amount of money into the new account or set up direct deposit. And it could take months before you get access to your cash. Still, if you compare bank account bonus offers, you may find a sweet deal.
More important than snagging a handful of cash, however, is finding a new bank that meets your needs. You shouldn’t opt for a new account unless you’re sure you can meet the bank’s rules and you won’t be wasting extra money on fees.
3. Get more federal insurance coverage
Deposits are insured through the Federal Deposit Insurance Corp. and the National Credit Union Share Insurance Fund. The limit is $250,000 per member institution, per depositor, per ownership category. That threshold isn’t an issue for most Americans, but for wealthier individuals it may not be high enough.
“If it’s $250K and you have $300K, $500K, whatever in the bank, as a safety net you want to make sure you diversify across banks,” says Nick Yrizarry, CEO of Align Wealth Advisors.
There are multiple ways to insure excess deposits. Opening an account at a new bank is just one way to qualify for additional federal insurance coverage. Since your money is safer in the bank than it is at home, it’s worth considering having a second bank if you just have one. It also doesn’t hurt to have another account in case there’s a temporary glitch or issue at your primary bank.
4. Earn a higher savings yield
Now that the Federal Reserve has made two emergency interest rate cuts in recent weeks, banks have lowered CD and savings account yields quite a bit. It’s a bummer for savers, especially since the Fed cut rates several times in 2019, too.
“We’re in a historic low-rate environment, which is great for borrowing, but it’s not great for people who are putting money in the bank,” Yrizarry says. “Go and see what the online banks are offering in terms of rates. And it’s usually more attractive, better rates because they don’t have all the expenses and overhead that a regular bank has.”
While there isn’t a chance to earn as must interest as in the past, there are still banks paying savings account holders nationwide close to 2 percent APY. Depending on the size of your savings account balance, even a small amount of extra interest could help as families struggle to make ends meet.
As you shop around and compare high-yield CDs and savings accounts, be sure to read the fine print. Some banks are even guaranteeing that they won’t change their savings rate for a set amount of time, a perk that could offer some much needed peace of mind.
5. New banks have emerged
Many new banks have made their debut in recent months, including some neobanks that primarily operate through digital channels. Now could be a good time to venture beyond what you’re used to, which could be banking with traditional, brick-and-mortar banks.
Folks in the market for a new checking account could consider Cogni, a digital banking platform that offers FDIC-insured accounts (through Community Federal Savings Bank of New York) without fees. Features include card control, single-use cards that protect shoppers from fraud and free, instant money transfers (currently, as long as you’re sending funds to another Cogni user). New users who join the waiting list are screened and onboarded daily. The target audience is 18-30 year-olds, but some features — like free access to more than 55,000 ATMs through the Allpoint network — are attracting older adults, says CEO and founder Archie Ravishankar.
Other options include popular challenger banks like Chime and newer online-only banks like Vio Bank, which launched in 2018. Many of these digital banks, however, have a limited number of products. You would have to go for online banks like CIT Bank and Ally if you wanted a new checking, savings account and CD all in one place.
More consumers opening accounts online
Customers in the past were more likely to open new accounts inside branches, but that behavior was changing even before the coronavirus became a big problem in the U.S. A recent J.D. Power survey finds that nearly one in three (31 percent) of new account openings happen online or through mobile apps, up from 22 percent in 2019.
The uptick in digital account opening is mainly due to more customers opening accounts online at the big six banks: Bank of America, Chase, Wells Fargo, Citi, PNC and U.S. Bank, says J.D. Power’s senior director of regional banking, Paul McAdam. Improved digital experiences are driving younger customers, including millennials and members of Generation X and Z, to the biggest banks.
Time will tell whether consumers getting used to branches limiting access due to the coronavirus will temporarily or permanently shift to using online-only banks instead.