A high-yield savings account is an important resource for financial independence. These accounts give you a safe place to store your money and have higher interest rates than checking accounts. These risk-free returns compound over time and can make your financial goals more attainable.
Chime is an online bank that has high-yield savings accounts available for its users. Its nature as an online bank helps the company have fewer fees than traditional banks. Chime also has an online checking account to help you avoid monhlly maintenance and overdraft fees.
Wondering if Chime makes sense for your finances? This review will explore how Chime savings accounts work, some of its advantages, and other details.
About Chime
Chime is a San Fransisco fintech company that was founded in 2012 by Chris Britt and Ryan King. It’s the largest virtual bank in the U.S. and has over 20 million account holders. Chime offers many financial products that can help consumers build their credit, manage their finances, and get closer to their goals.
The bank focuses on serving consumers with personal checking and savings accounts. It currently does not have bank accounts or financial products for small business owners.
Although Chime does not have any physical branches, the bank makes up for this with a network of 60,000 ATMs. These ATMs are located in public places and stores throughout the United States, such as Target, CVS, and Walgreens.
What is a Chime Savings Account?
A Chime Savings Account is a bank account that offers 2.00% APY on your savings. If you put $10,000 into your Chime Savings account and don’t touch it, you will have $10,200 at the end of the year. Then, the savings will continue to compound. Chime’s savings rate is 4.7 times the national average.
These savings accounts are insured by the Federal Deposit Insurance Corporation and are affordable. While it’s free to open a bank account, many financial institutions charge fees that can make these accounts expensive. Chime is different.
The fintech company does not have any monthly fees, and you can earn as much interest as possible. Other banks limit how much interest you can earn in a given year or how much funds you can put into a high-yield savings account.
How Does Chime Savings Account Work?
A Chime Savings Account is similar to the savings account you would find at a bank with physical branches. You can visit the Chime website or download the mobile app to access your account.
Chime does not have any physical branches, but you can still deposit and withdraw money. The bank’s ATM network makes it easy to make fee-free transfers. You can also set up electronic transfers with many employers and take pictures of your check for mobile deposits. The lack of physical branches helps Chime keep its costs low, which means fewer fees and higher interest rates on savings accounts. Chime has many features built into its savings accounts that help consumers build their wealth and automate the savings process.
Chime Savings Account Features
Chime has several features that help its savings account compete with some of the top banks in the industry. These are some of the perks.
Automatic Savings
Automatic Savings allows you to transfer a fixed percentage of every payment to your savings account. These automatic transfers ensure the extra money in your checking account gets moved to your savings account, where the interest rate is higher. You can adjust this percentage if you want to move additional funds into your savings account or take a break to cover necessary expenses.
Automatic savings are a core pillar of many retirement plans. Not everyone checks their bank account daily, and staying on top of investments is even more difficult. An automatic approach ensures your money is still working hard for you instead of staying stagnant in your checking account. You don’t have to remember to look over your accounts every day. Chime will handle it for you. Then, you only have to look at your accounts weekly to stay on top of them.
No Minimum Balance Requirement
Chime savings accounts do not have minimum balance requirements. Many banks use this requirement to have customers store money money in their accounts. The minimum balance requirement is often higher for high-yield savings accounts. You can get started with Chime even if you only have $1 to open your savings account. All of your money will grow at 2% APY, and the more you put in, the more you will earn.
No Hidden Fees
Chime does not have any hidden fees for its savings accounts. Many banks get sneaky because they have higher overheads than Chime. However, the fintech company does not have monthly maintenance fees or any of the other fees you would expect from another bank. Chime is upfront about the fees it has and keeps them as low as possible.
While overdrafts are a common problem that results in high fees, Chime has a workaround. The company uses SpotMe to temporarily lend people cash. It’s like a cash advance but with no interest payments. Chime uses your next paycheck to pay off SpotMe if you use it to avoid an overdraft fee. Chime’s SpotMe feature covers you for up to $200. The amount you can receive depends on your banking history. The initial limit is $20.
Round Up
The Chime Round Up features lets you turn every purchase into an opportunity to grow your savings. Chime will round up every purchase to the nearest dollar and put the difference into your savings account. For instance, if you make a $24.23 purchase, the purchase gets rounded up to $25. It took $0.77 to round up that purchase, and those extra funds now go into your savings account. The $0.77 then grows at 2% APY instead of being stuck in your checking account.
An extra $0.77 won’t do much for your finances, even if it is growing at 2% APY. However, you likely won’t feel the impact of not having an extra $0.77 in your checking account. Each purchase contributes to your savings account, so it’s possible to end up with over $20 in additional funds each year with this strategy.
You can turn off this strategy at any time and make manual transfers. However, it’s an extra feature that grows your savings account. More importantly, the Round Up feature can encourage you to develop financial habits that fortify your savings account. You can save a few dollars each month with this strategy and use that as your base.
Benefits of Using a Chime Savings Account
Chime savings accounts offer many benefits. These perks explain why over 20 million people have come to trust Chime’s banking solutions.
High Yield Savings
Chime has a high-yield savings account that has a savings rate of 4.7 times the national average. Interest income from a bank account is risk-free, unlike other asset choices. You can potentially generate higher returns with stocks and real estate, but these asset classes can also lose value. Your principal is protected at all times when you keep your money in a Chime savings account.
The interest from a Chime savings account grows each year. For instance, your $20,000 will turn into $20,400 after one year of 2% APY. In the following year, your $20,400 will turn into $20,808. In the second year, the consumer earns $408 in interest instead of $400. This compounding continues each year, as the third year will result in a $21,224.16 balance. You can contribute to your savings account to increase how much interest you receive. The interest for a Chime savings account compounds monthly.
Saving Money Made Easier
Saving money is an important component of building up your emergency fund and retiring early. Only focusing on what you bring in can lead to unpleasant financial surprises in the future. Chime helps people focus on their profits and minimizes the likelihood of consumers misallocating their extra cash.
Chime has many savings features that make it easier to build up your savings over time. Round Up turns every purchase into a savings opportunity, and you can automatically transfer a percentage of every paycheck to your savings account. These features allow consumers to save more money even if they have a hands-off approach.
It’s easy to only think about saving money by moving funds from your checking account to your savings account. However, you also save money when you avoid fees. Chime doesn’t have most of the fees that are common with other financial institutions. Even costs like overdraft fees can be avoided. Chime has the SpotMe feature, which helps people get up to $200 in a zero-interest cash advance. Chime will use your next paycheck to recoup the SpotMe proceeds.
Safety and Security
Safety and security are a big deal in an online world where many hackers are trying to infiltrate databases. Many companies have fortified their online defenses, including Chime.
Chime offers bank accounts that are insured by the Federal Deposit Insurance Corporation. Chime is a fintech company that offers FDIC-insured savings accounts through its partnership with The Bancorp Bank and Stride Bank. Both of those banks are FDIC members.
Chime has several security controls in place that keep your account safe. An FDIC insurance policy is just the start, but using settings in the app can add a layer of protection. If you detect any suspicious activity with your Chime debit card or credit builder card, you can immediately block all transactions from the Chime app. You can simply use the toggle to determine if you want to block your transactions or put no restrictions on your cards.
You can also set up real-time alerts on your smartphone so you’re in the loop for every purchase. Consumers can receive notifications about their purchases and deposits that arrive in their bank accounts. If you detect any suspicious activity, you can temporarily stop transactions from your cards and get in touch with customer support. Chime has two-factor authentication and fingerprint authentication to fortify your defenses.
If you use a Chime Visa Debit Card, it is protected by the Visa Zero Liability Policy. This policy safeguards cardholders from unauthorized charges. With any bank, you must notify them within 60 days of receiving a statement that shows the unauthorized transaction. The sooner you report any unauthorized transactions, the sooner you can receive your funds back. Missing the 60-day threshold can potentially result in not getting reimbursed for an unauthorized transaction. This risk is present in any bank.
FDIC Insurance
FDIC insurance protects the first $250,000 in your Chime savings account. This insurance policy is critical for the banking industry and helped consumers regain faith in the banking system. If the bank defaults, the FDIC sets you up with a new bank and replenishes your funds in the process. While defaults aren’t common, some of them become high-profile collapses, such as what consumers witnessed with Silicon Valley Bank. The FDIC policy has been around for over 90 years and is a staple for any financial institution. Chime accounts are insured by this policy, and you should only do your banking with a financial institution that is FDIC-insured.
Is It Safe To Save Money with Chime?
Chime is a safe bank that has many safety features and comes with FDIC-insured accounts. You can use features like two-factor authentication to add an extra layer of protection around your finances. Your money will grow at 2% APY, and you won’t have to worry about losing your money. Stocks and real estate can generate higher returns, but both of these investments are vulnerable to losing principal.
Consumers can choose from many banks, but they should filter their search to safety. Luckily, many banks continue to step up on security and follow the necessary protocols to keep consumers safe. Chime is one of the many online banks that take safety seriously.
Is It a Good Idea to Open a Chime Savings Account?
Opening a Chime savings account can be a good idea for many consumers. Over 20 million consumers have already taken the steps to open their Chime savings accounts. Users immediately get a high-interest rate on funds they can access at any time. Other banks lock their high-interest rates in certificates of deposits. The funds in CDs are less accessible than the ones in high-yield savings accounts. If you want a great interest rate and easy accessibility to your cash, a Chime savings account can be a great idea.
Opening a Chime savings account also lets you unlock all of the great features, such as Round Ups, SpotMe, and others. When you open a bank account, you don’t only get the bank account. You also get the entire banking experience that the financial institution provides.
How to Open a Chime Savings Account
Ready to get started with a Chime Savings Account? This guide will walk you through the eligibility criteria and steps you can take.
Eligibility Criteria
Chime has a few parameters you have to meet in order to open a savings account. These are the requirements:
- You must be at least 18 years old
- You must be a citizen or a permanent resident of the United States
- You must have a U.S. Post Office-recognized residential mailing address
- You must have a Social Security number
Chime will also check to ensure that you do not have an existing account with them. You cannot open two separate Chime accounts. However, you can have several bank accounts under the umbrella of a single Chime account.
Necessary Documentation
Chime will ask for some legal documentation, such as your ID, to move forward with creating your account. You have to upload the image of a qualifying ID and make sure it is legible. Chime accepts several types of U.S. ID, including driver’s licenses, passports, State IDs, passports, passport cards, permanent resident cards, and work permits.
Chime does not perform any credit checks during this process. It’s a common rule among all banks when you open an account with them. Chime outlines additional requirements on its website.
Step-by-step Process
You can visit Chime’s website and enter your name and email. After you fulfill this step, Chime will ask for some basic information, such as your Social Security Number and a picture of your ID. Once you complete this process, Chime will send you an email with more information about getting started with your account.
Other Chime Products
- Chime Checking Account and Debit Card: Get overdraft protection and a debit card with enhanced security features.
- Chime Credit Builder: The secured credit card can help you get your credit on the right track, and it has no annual fees.
