Top Four Alternatives to Banks You Can Consider
Global inflation at this point is 8.5%, and as per the records, it’s the highest in the last 40 years. Additionally, the average deposit yield is still hovering around 0.06%, and that’s terrible news. Taking the current situation into account, you are doing everything but saving your money, especially when you are storing your money in banks. If you are interested in seeing your money grow, you can opt to invest it somewhere worthwhile. However, investments have certain risks, which might take a toll on your emergency fund. You will be happy to know that savings accounts aren’t the only option you have when it comes to saving money. Below are the top four alternatives to banks which you might want to consider.
If you are looking out for all the facilities of a bank, like a savings account, checking account, online banking, debit cards, mobile apps, and so on, credit unions have all of that. Moreover, you get better rates and more efficient customer service. These are strong reasons why you can prefer credit unions to banks. Credit unions are owned by members and are non-profit financial institutions. When depositing your money in a credit union, you buy a stake in the institution. There is no headache in fulfilling the demands of the shareholders. Plus, credit unions usually offer higher yields on the amount you have deposited and better interest rates on loans than banks.
Certificates of Deposit
CDS or certificates of deposits are considered a savings vehicle that stores a sum of money determined in advance for a period that has also been determined in advance. Compared to regular savings accounts, you are not allowed to take out your money until the certificate of deposit matures. A CD’s development period is six months, a year, or even five years. The longer it takes to grow, the higher the yield. When the certificate of deposit matures, you can withdraw the money and the interest you earned. If you withdraw the money before the expiry of the maturity term, you will have to shell out a penalty. CDs are safe investments. However, inflation will reduce or eliminate the actual returns.
Cash Management Accounts
Banks or credit unions don’t have cash management accounts. As per Forbes, cash management accounts are offered by online brokerages, Robo advisors, and mobile trading apps. These accounts are known to provide convenience. CMAs not only help to manage your money but also make payments and investments. You will get all the benefits in one place. Several CMAs bring together the features of both checking and saving accounts. Compared to savings accounts, CMAs pay higher yields, and you don’t need to pay. However, you need higher minimum deposits than a standard bank account.
Money Market Accounts
No, money market accounts have nothing to do with the stock market. However, money market accounts can prove to be a fantastic investment. FDIC ensures them; therefore, they provide you with the safety, just as savings accounts do. The other benefits include higher yields, more features, and flexibility such as debit cards and check-writing. Comparing money market accounts to the certificates of deposit, you can withdraw your money anytime without shelling out a penalty. But, you need to keep a higher minimum deposit.
Online Banks & Neobanks
The last few years have been a witness to the growing popularity of online banks and new banks. The services are expanding worldwide. Since there are no branches, you can avail of the services online. Like a regular bank, an online bank probably has its banking license. Neobanks partners with licensed banks to keep your money safe. There are some online banks and neobanks that offer currency exchange services as well as international payments, along with credit and loan services.
Peer-to-peer lending and Wise are the other options you can avail of if you want better financial services. You can try out these banking alternatives to manage your money more efficiently. One thing is for sure – going digital is the way forward.
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