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Banking has changed drastically over the last few decades. Modern banking practices have quickly and consistently migrated to the virtual world and left the traditional banking ways behind. Depositing cash to open up a savings account or even transferring money across accounts are now activities that you can do completely online.
This move has benefitted consumers in many ways. From the comfort of home or even on the go, the average person can now access more investment tools and a wider range of rates. The online banking world has also created a safer, secure way to handle opening accounts and processing transactions.
If you are looking for alternatives to traditional big banks or conventional savings and checking accounts at your local bank, there are many options available. Here is a guide to some modern alternatives to traditional banking.
Online-Only Banks

These banks operate solely online, without any physical brick-and-mortar branches. Often times the process for opening an online savings account involves only sending a few digital documents for identity verification, along with a potential credit report inquiry. Otherwise, the process to set up a basic checking or savings account is usually quick and simple.

Best Online Banks
Most online banks offer a downloadable app to make mobile banking incredibly convenient and easy. Once the account is set up, any documents like checks and credit cards are mailed out. Convenience and security are paramount for these mobile-first banking services so there usually are two or three steps needed in order to access sensitive account information.
Check out the best online banks to consider and compare each one's offerings and features to find the right bank for you.
Credit Unions
Credit unions are financial institutions that are focused on the community, typically operate as a not-for-profit, provide core banking services, and have a special knack for focusing on the customer. The big difference from regular banks is that all depositors are considered owners of the credit union and have a vote when it comes to electing the board of directors. Some similarities to traditional banks include the types of accounts offered, the fiduciary services provided and the federally insured deposit protections.
One big appeal of credit unions over banks is that their rates are usually better. For certain types of savings accounts, money market funds and certificates of deposit, credit unions on average may offer higher interest rates. And on the opposite side, when borrowing, credit unions are known to lend with lower interest rates than large banks. These two factors make credit unions attractive to those looking for an alternative to big banks.
Many credit unions, including well-known ones such as PenFed, Alliant, and America First, also have robust online services, and some are even online-only. You no longer have to live in the neighborhood, town, city, or even the state to access their services. However, you do need to meet certain requirements to become a member. These requirements vary by credit union.
Online Payment Apps

Online payment systems have become a mainstay, not just in e-commerce, but also in brick-and-mortar establishments and even in your digital wallet. With an online payment provider, you get an account that holds money you've received or sent directly from someone else. You can then use your balance to make payments anywhere that accepts transactions from that company.
One of the distinct advantages of online payment systems is that you don't need to whip out a card, enter numbers and expiration dates, or swipe in order to make a purchase. All you have to do is log in to your account and make the payment using the mobile app.
Here are some of the more common solutions and why consumers turn to them instead of—or in addition to—traditional bank accounts:
- PayPal. PayPal is one of the most well-known online payment solutions in the world, which is one of its primary advantages. PayPal is accepted by a wide variety of retailers and e-commerce sites. In addition, PayPal produces a wide range of reports, savings opportunities, and financial tools to help you analyze your finances and plan for the future.
- Venmo. Venmo gained popularity over the years as a useful, convenient way to share money between friends and relatives. It focuses on making it easy to pay people within your circle, whether you owe them money, need to split a restaurant bill, pay the rent, or digitally exchange funds for a variety of other reasons. With direct deposit and an optional debit card, Venmo is a viable contender as a money management tool.
- Cash App. The focus of Cash App is providing users with the ability to quickly and easily send money to others using an app on their mobile device. In addition, with Cash App, users can buy stocks, as well as Bitcoin from right within their platform. Users also have the freedom to file their taxes from within the app, which could be another significant time-saver.
Personal Brokerage Accounts
A personal brokerage account provides investors with an easy way to make and manage investments and trade stocks. Not only do users get the ability to make trades and establish an investment portfolio, but they may also have access to a linked debit card to use with the account, making it a viable alternative to a traditional checking account.

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Online brokerage platforms such as Stash and Robinhood, for example, have emerged as popular platforms for new millennial investors to manage cash and investments. There are also many large and well-established brokerages to choose from, which may allow transfers of money between accounts within the same bank or across external banks. This gives users the flexibility to fund trades and make withdrawals however they desire. Some brokerages also provide graphs and charts that help analyze one's investment history and overall portfolio performance.
Money Market Accounts
Money market accounts are similar to savings accounts in that the account holder deposits fund into the account and interest begins to accrue. Money market accounts are insured by the FDIC and are known to pay slightly higher interest rates than regular savings accounts while offering limited checking account services.
The benefit of a money market account over a savings account is the ability to write checks and have a linked debit card, making it easier to access funds when you need to pay bills or make a large purchase. However, you may be charged a fee if you go over your monthly transfer limit and some accounts may require a minimum opening deposit or minimum balance to avoid a fee.
Money Market Mutual Funds

Even though the names are similar, money market mutual funds are not the same as money market deposit accounts. Money market mutual funds are investment vehicles that invest in assets and are developed and managed by an investment fund company, not a bank, so they are not insured by the FDIC. These are usually high-rated assets like government-backed assets, such as government or treasury bonds that offer relatively stable rates of return (although with any investment, nothing is guaranteed).
The objective of a money market mutual fund is to provide investors with a safer, low-risk, short-term investment option but there is no promise of a principal payout. They are typically used as a place to put money for a short time before it is moved to another investment vehicle as it can be relatively easy to withdraw money when it's needed.
Certificates of Deposit
For those looking to earn a higher interest rate than a regular savings account, certificates of deposit may be something to consider. These investments involve depositing funds and keeping them invested for a defined period of time at a predetermined interest rate.
Each institution will have its own set of time frames and rates so finding a good one will take some searching. Typically though, the longer you agree to keep your money deposited, the higher the interest rate yield tends to be. If something comes up and the money has to be retrieved before the time period is up, there may be a penalty for early withdrawals.
More Options and More Flexibility
Traditional ways of banking are slowly being replaced with more convenient options. The investment tools outlined above are just some of the benefits of online banking services. Improved exposure to better rates and convenience are compelling investors to pass by the local branch and log in at home instead.
Basic Banking FAQs
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Many online banks provide investment tools that are federally insured. This means that money deposited into these financial institutions is protected by the Federal Deposit Insurance Corporation (FDIC).
Online banks also use encryption to keep your personal data out of the hands of hackers. Encryption turns your data into unreadable text that can't be decrypted by someone unless they have a secure digital key. When searching for an online bank, make sure to find one that is federally insured and offers the right products for your needs.
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There is no limit to how many bank accounts you can have, so consumers can open as many as they need to fit their needs. Bank accounts can be utilized for a variety of different reasons, such as saving for a house, storing an emergency fund, or investing for retirement. Because each individual has their own investment needs and minimum savings rates, each investor should decide how many bank accounts they need based on their financial goals.
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In order to choose a bank that fits your investment needs, you have to first know what you need based on features, service, products, etc. Then you can make a checklist and compare what each bank offers against your personal requirements. There are a lot of choices but if you know exactly what you're looking for, that can guide you towards the right match. Spend time comparing what different online banks have to offer. Sometimes they provide special rates for new customers or offer bank bonuses and promotions for new accounts.