Sunday, 25 October 2020

Chime vs Simple: Which Fintech Disruptor is Better?

Chime vs Simple: Which Fintech Disruptor is Better?
30 Apr
11:29

Chime and Simple are relatively new financial services companies that aim to make money management easier and more accessible. They are not banks, but they offer accounts designed to be used as checking and savings accounts. Both operate solely online, with a big focus on their mobile apps, available for both iOS and Android. And both provide access to thousands of ATMs through partner networks for when you need to withdraw cash.

Chime’s mission statement asserts that “everyone deserves financial peace of mind” and they’ll help their customers “get ahead by making managing money easy.” Indeed, Chime’s big claim to being a fintech disruptor is its ability to credit your account with your paycheck two days ahead of schedule. Headquartered in Wilmington, Del., Chime partners with The Bancorp Bank to offer FDIC-insured bank accounts and issue a Visa® debit card.

Simple was founded to address what it perceives as the general frustration with hidden fees and seemingly redundant banking products. As its name suggests, Simple charges no fees and only offers a single “cash management”-style account, which combines savings, spending and budgeting functions. Simple was founded in 2009 and is headquartered in Portland, Ore. Its accounts are managed in partnership with BBVA Compass, which issues the Simple Visa Card and provides FDIC insurance on deposits.

Chime vs Simple: How their rates compare

Chime focuses on saving the money you already have, rather than growing your balances at a competitive rate. The Chime Spending Account — the company’s take on a checking account — does not earn interest, and its optional Savings Account earns at only a minimal rate. On the other hand, Simple offers a pretty solid APY on its savings account.

  Chime Simple National average Online bank average
Savings 0.01% APY 0.01% or 2.02% APY depending on balance 0.27% APY % APY
Checking n/a 0.01% APY 0.19% APY 0.52% APY

There are a few requirements to meet if you want to earn at Simple’s high-yield rate. For starters, you need to open a Simple Checking account or Simple Shared Account, its checking account product for two users (detailed more below). You’ll also need to open a Protected Goals savings account. Keeping at least $2,000 in your Protected Goals account will allow you to earn 2.02% APY on your entire savings balance. If your balance drops below $2,000, you’ll earn 0.01% APY instead. The Simple Checking account earns a 0.01% APY, regardless of balance.

Chime vs Simple: Which has better account options?

Both Chime and Simple offer checking and savings accounts, although unique features and perks strongly differentiate them. Chime’s Spending Account is its checking account. You can access your account on a mobile device, online, and via the Chime Visa® Debit Card. All in all, it’s a pretty standard checking account, although when you set up direct deposit you are eligible to get paid early. Chime eliminates the typical one- to two-day “electronic limbo” of waiting for paychecks to move via Automated Clearing House (ACH) from your employer’s bank to your account. Instead, Chime makes your paycheck instantly accessible to you once your employer deposits it. This can be a great option for those who live paycheck to paycheck and need more immediate access to that money. However, there’s no benefit for self-employed workers who lack any direct deposits.

Chime also offers a Savings Account with novel features that automate the savings process. Save When You Spend automatically rounds up your debit card transactions to the nearest dollar and transfers the extra balance from your Spending Account to your Savings Account. Chime members can also choose to automatically set aside 10% of each paycheck towards savings.

Like Chime, Simple helps you save and manage your money via handy tools; unlike Chime, it offers a competitive interest rate on savings. Simple’s budget features let you allocate income among expenses, savings and discretionary spending accounts. The Protected Goals savings component comprises one or more Savings Goals, such as college tuition or your next big vacation. You set an amount to save, a date to save it by and how often you want to transfer money from your discretionary spending account. You can even establish an emergency fund, which Simple gradually fills from the discretionary account.

Simple also offers Shared Accounts — Chime does not currently offer joint accounts. Shared Accounts allow you and one partner to manage and save your money together, with all the same features and tools like Expenses, Safe-to-Spend and Goals. Plus, it doesn’t even have to be your spouse or romantic partner — according to Simple, you can open a Shared Account with anyone from a roommate to the person you just met at a hostel to your mom. Each person will still have their own individual Simple accounts, but you can come together with a Shared Account to save toward common goals.

Chime vs Simple: How they compare on fees

  Chime Simple
Account monthly fee $0 $0
ATM fees $2.50 (out-of-network ATM fee/Over The Counter fee) $0
Overdraft fees $0 $0

While other banks may boast a fee-free experience, but then charge you for overdrafts, Simple is truly free of any account fees. There are no monthly fees, no overdraft fees, and no foreign ATM fees. However, it’s still wise to stick to Allpoint ATMs when you can — while Simple may not charge a fee, the ATM owner still does and Simple doesn’t reimburse ATM surcharges. You will also face Visa’s International Service Assessment (ISA) of 1% of the transaction amount if you use your Simple card internationally. As for overdrafts, your transaction will simply be declined if you try to make a purchase without sufficient funds.

Chime is only slightly less fee-free than Simple. It doesn’t charge fees for overdrafts, transactions, card replacements and more. However, if you use an ATM outside of the MoneyPass or Visa Plus Alliance networks or make an over-the-counter withdrawal, you’ll be charged a $2.50 fee. As with Simple, any overdraft transactions will be declined.

Without charging fees, these companies have to make money somehow, right? Both Chime and Simple make theirs by taking a percentage of the interchange fees from your debit card transactions at merchants (they divide the fees with the card issuer). Simple also makes money through the interest margin on deposits.

Who should bank with Chime?

Chime is useful if you find yourself needing access to your paychecks sooner than usual. Its Get Paid Early model takes your money out of a bank holding pattern and puts it in your hands as soon as it’s deposited by your employer.

Chime is also a great option for customers who might have bad credit or a compromised banking history. Unlike many traditional banks, Chime doesn’t use ChexSystems, a consumer reporting agency that keeps track of any problems in your banking history. Instead, Chime opens the doors for customers with bad credit to help them get back on their feet through their essentially no-fee account model and automatic savings options.

Who should bank with Simple?

You should bank with Simple if you’re looking for a completely fee-free banking experience and the savings benefits of a high savings account rate. There are no fees, even for out-of-network ATM usage. And if you’re able to keep at least $2,000 stashed away towards Savings Goals, you’ll snag a competitive APY and grow your savings faster.

Alternatives

One alternative to Chime and Simple is Aspiration. Aspiration sets itself apart by offering “socially-conscious and sustainable” banking and investment products, and donates 10% of its customer-paid profits to American charities. It also operates on a Pay What Is Fair system, where its customers get to choose what to pay in monthly fees, even if it’s $0. You can use any ATM in the world without incurring a fee from Aspiration, which will also reimburse you for any ATM surcharges you rack up.

Its banking product is a cash management account called Aspiration Spend & Save. It earns 2.00% APY on the entire Save account. Even better, the Spend account earns 1% cash back on purchases at socially responsible businesses and 0.50% cash back at not-so-conscious businesses.

Another alternative is Empower, which operates strictly on its mobile app. Empower charges zero fees and provides an AI assistant to help you combine accounts, track spending and find savings. It earns some solid rewards, too, although its website language is slightly misleading in places. By default, using the Empower debit card earns 1% cash back on the first $1,000 you spend each month, and additionally, you’ll earn 2.15% APY on your savings account balance. However, you can snag a 30-day boost, increasing your cash back to 2% and earning you an additional 2.15% APY for every person you successfully refer to Empower.

Empower forgoes all fees, including ATM usage, service fees, overdrafts and more. Empower will also reimburse you for one out-of-network ATM fee per month. Otherwise, you can physically access your cash through MoneyPass ATMs.

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Lauren Perez
Lauren Perez |

Lauren Perez is a writer at MagnifyMoney. You can email Lauren here

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Source: https://www.magnifymoney.com/blog/banking/chime-vs-simple/

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