We’ve all heard of them, seen their florescent cards, admired their ads on the tube: App-Based Banks. They don’t have branches, if you need to speak to customer services, just open a chat on the app.
These banks can be fantastic. They give you live spending notifications, round up your purchases to save up, and help you create a budget.
One of my biggest issues with banking, while I was at University, was that my balance was never correct. I’d have a quick check of my balance (which took a lot of courage back then) and be quite satisfied with the result, only for my bank to text me the next day to say that I was in my overdraft. Or, the more threatening ‘you’ve gone over your overdraft limit’ text. I struggled to know what was coming and what was going.
Digital Banking completely eradicates this. When you spend money, you receive a notification on your phone (or even your smart watch!). Sometimes, you get the notification before the receipt has printed. You know what your balance is, you know what payments are coming up, and you know how much you have left in your budget for the month.
Rounding up purchases
When I had a bank account as a teenager, I had a very similar feature on my account called ‘Save the Change’, I was only at 6th form, so I wasn’t using my account very heavily, but I did enjoy transferring the £30-£40 back to my main account now and again. The gist of the feature is that you spend money, like normal, and the application will round up the purchase to the next pound and put the difference into your pot.
All of the digital banks have brought in this feature recently, and it’s been fantastic. You can set up a savings account with a photograph and name of your choice and turn on the round-ups feature. I don’t transfer anything out of it, I just leave it to add up.
Budgeting with digital banking can be much more efficient than with pen and paper, or a spreadsheet. You’re given a list of different categories (bills, groceries, health, etc) and determine how much you want to budget yourself to spend monthly.
When you’re nearing the end of your limit for each category (or total limit), you receive a notification alongside the latest spending notification. This allows you to rethink your spending habits.
Once you’ve been using a digital bank for a while, you’ll get a lot of information out of the spending insights they give you. You’re able to see how much you tend to spend in each category, and even how much your monthly spend is at individual merchants – if you’re looking for ways to cut back on your spending, this is a great way of realising your habits, allowing you to make a change to small things that add up – like your coffee habit.
The customer service I’ve received for my digital banks completely trumps traditional banks. You can say goodbye to the repetitive hold music, interrupted periodically by ‘your call is really important to us’, and instead, chat to a real person via the app. I’ve never had to wait more than a few minutes for an answer, and even while waiting, I could go about my normal day.
Opening the account and verifying your identity is easy, you take a photo of your ID, make a little video to say you want an account, and next thing you know, the card is in the post. For comparison, when I switched between high street banks recently, I received eleven letters in the post and had to sign one and return it.
While I love my digital bank account, I have it as a secondary account. I like to have a place that my money lands, where rent and bills are paid out, then I send my ‘spending money’ to my digital account. This way I feel like I have control over money I’m allowed to spend, and money that I don’t.