Conventional banks may have dominated the industry for decades, but they are now facing increasing competition from more nimble and agile financial services companies.
The rapid advancement in mobile technology has brought about a revolution in the banking industry. Neobanks have arrived to compete with more established banking institutions.
They operate on a branchless model to keep costs low. This enables the neobanks to provide lower fees and better rates on deposits because they don’t have massive overheads to bear.
There are a lot of reasons why many people are now preferring to opt for online banks. The biggest reason has to be the ease with which an account can be opened.
Customers no longer need to visit a branch and potentially deal with less than satisfactory customer service. They can quickly set up an account and even invest in funds all from the comfort of their couch by simply using their mobile devices.
Not all online banks are built alike, though. Some are very specific about the services that they offer to customers. Others strive to be a replacement for their existing conventional bank with services that may include debit cards, cash management accounts, investment and retirement funds, and more.
When trying to decide which one is better for your needs, first be mindful about what you’re looking to get out of the online banking experience. Are you considering a shift because you want to bank with a company that shares your social values?
Or are you simply looking for higher rates on investment products and that’s the reason why you want to trust an online bank with your money?
With these questions answered, look at the various products and services offered by the banks you’re looking at. One may have certain services that may make it an instant fit for you, even if you were considering it in the first place.
It’s always best to look at as many options as possible before deciding on a bank, online or otherwise.
VirtualBank is an online division of Tennessee-based First Horizon Bank. It operates entirely on the branchless banking model and provides savings products.
VirtualBank is very tightly focused on what it does and the services that it provides. It’s meant more for those who don’t need an account for frequent transactions, but one to hold their money in to provide them with a decent return rate.
This online bank offers eMoney Market and eCDs, or Certificates of Deposit. Both of these are savings products and are well regarded in the industry. This enables customers to earn competitive returns on their funds.
Compared to some other banking institutions, VirtualBank has a low minimum deposit to open an eCD account. It also provides customers with free online and mobile banking in addition to multiple term options and automatic renewal at maturity for the eCDs.
Decent interest rates
Customers who open an eMoney Market account with VirtualBank can get 0.45% APY when they deposit new money, that is money not currently held at the bank. The interest is paid monthly.
There’s a low minimum deposit of $100 and if that’s maintained, customers can avoid the $5 monthly charge. All customers get free mobile deposits, as well as online and mobile banking.
Flexible terms for CDs
VirtualBank makes it very easy to buy certificates of deposit online. The terms range from 1 month up to 60 months with the APY ranging between 0.10% to 0.60% depending on the term selected.
Customers need not worry about losing principal balances on the investment. All CDs can be automatically renewed at maturity so it’s a good option for the “set and forget” crowd that doesn’t want to handle renewals manually.
$10,000 minimum deposit for eCDs
Those who want to take advantage of VirtualBank’s eCDs need at least $10,000. That’s the minimum deposit required to get a certificate of deposit from the bank. $10,000 may prevent a lot of people from utilizing this service.
Penalties for early withdrawal
It’s common for certificates of deposit to have a penalty attached to them in case of early withdrawal. Despite being an online bank, VirtualBank also charges customers an early withdrawal fee if they don’t hold the eCD for the entirety of its term.
Out of the many neobanks operating today, Aspiration stands out because of its socially conscious values. Aspiration is a banking services provider so it doesn’t have a banking charter itself.
However, it utilizes its relationships with banks to provide customers with cash management accounts and investment products. It does all of that while making a 100% commitment to never fund any fossil fuel projects as they cause irreparable damage to our planet.
Aspiration’s socially conscious values extend beyond its commitment to clean money. It also donates 10% of every dollar received from customers to charities that help Americans in need.
The neobank also has a Giving platform through which customers can easily make donations to charities that have been vetted.
Savings accounts with high APY
Aspiration offers an APY of up to 1.00%, which is higher than what most conventional banks and even online banks offer.
Aspiration passes on the benefit of it being a neobank to customers by keeping service fees at a minimum. The fee it charges for services is actually what it costs the company to execute them.
Socially conscious mutual fund
If you prefer investing in companies that are mindful of their impact on the environment, then Aspiration’s Redwood Fund is the right fit. It invests only in companies that don’t rely on fossil fuels.
Limited investment products
Customers only have access to limited investment products. Aspiration doesn’t offer other products like certificates of deposit
Monthly fees to access higher APY
Aspiration’s higher APY is only available through the Aspiration Plus service tier. It has a $15 per month service fee with no option to either maintain a minimum balance or meet a transaction limit to waive it.
No credit cards
Like most other neobanks, Aspiration doesn’t offer credit cards, so it remains unsuitable for customers who need products that provide them with credit or help them build their credit score.
APY on savings – VirtualBank vs. Aspiration
Aspiration offers a higher APY on its cash management account even when compared to the two investment products that VirtualBank offers. Even with the $15 per month service fee, the interest rates make Aspiration the better option.
Retirement products – VirtualBank vs. Aspiration
VirtualBank doesn’t provide any retirement products. Aspiration has IRAs that enable its customers to plan for their future and also save on their taxes. The IRAs provide tax-deferred growth and invest only in sustainable companies that think about the environment.
Which is better?
VirtualBank and Aspiration have more similarities than differences. They are both online-only and provide access to investment products. The higher rates offered by Aspiration make it a better option. Customers who want diversification in their portfolio would find VirtualBank better suited to them.
Something that may put some customers off from VirtualBank is that it only provides customer service during business hours on weekdays. They may also not like the $10,000 minimum deposit requirement for eCDs which is quite high.
Aspiration remains the better option for those who want fuss-free cash management accounts and investment funds with the peace of mind that their deposits aren’t used to fund fossil fuel projects.
Join the green money revolution today and open an account with Aspiration to access over 55,000 free in-network ATMs, cash back on purchases, and even the option to plant a tree with every purchase.