Back in the Day
When my grandmother lived in New York City in the 1940s, she paid 10 cents to ride the subway and complained about the cost. In the 1950s, she started using tokens (which cost a whopping 15 cents) — a nifty change in how she purchased transportation. Thirty years later, my father had credit cards at his disposal to make certain purchases (no cash required!). And now, in 2014, I could very well start paying for an array of items with my smartphone.
If you have a smartphone, you have a ton of options when it comes to avoiding big banks, ditching (some) traditional credit usage and even paying back friends. From the $10 you owe your coworker to how to send your rent payment, here are five mobile options that are replacing credit cards, paper checks and ATM trips.
Check splitters of the world unite. While you previously had to keep a mental tab of how much you owed this or that friend, Venmo turns those tabs into instant money transfers. The Venmo app links to your debit or credit cards and allows you to transfer money with a tap of your phone, peer-to-peer. There’s no fee for debit card transactions and a small fee for credit cards. In addition to sending funds, you can also “bill” for costs of your choosing.
This app is a further improvement on the now-dated bank transfer since you don’t need to share all those sensitive account details to pay back larger amounts — like rent, groceries or utilities. Simply find your friend on Venmo and you’re halfway there.
Recently I went to a bridal expo and there were no credit card machines in sight. However, there was plenty to purchase: custom-made veils, stationery, photography sessions, even wedding dresses. But each vendor was ready to make sales with a very unassuming credit card reader attached to either their phone or iPad. What this signals to me is that traditional credit card machines, like paper checks, are quickly fading from the business landscape.
PayPal Here, a free app plus card reader, combines transactions and payment oversight in one place. Not only does this app allow you to accept debit and credit cards, but you can also use it to send invoices, accept checks, track payments (including cash) and accept PayPal payments. Paypal charges 2.7 percent per U.S. card transaction, but there are no monthly fees or long-term contracts.
Big banks may claim their apps are like little banks in your pocket, but GoBank really is just that. GoBank, partner of Walmart, is a bank without brick-and-mortar locations, overdraft fees, a minimum balance requirement or penalty fees. You can use a variety of GoBank-approved ATMs free (out-of-network ATMS cost an additional $2.50), deposit checks with your phone’s camera, send money to friends using an email address, pay bills and even budget your money. GoBank’s direct deposit feature also ensures that you can get paid up to two days earlier than your confirmed payday. (How that works: GoBank maintains that employers generally notify the bank two days before the official payday that the money is available. GoBank claims to intercept this wait time by just giving you your money when it’s available.)
A starter kit, which includes a starter MasterCard debit card, costs $2.99 and you can open an account with as little as $20. Monthly membership costs $8.95, but that fee is waived when you set up monthly direct deposits of at least $500.
GoBank accounts are FDIC-insured.
Much like GoBank, Simple is a banking app for people who want to get away from big banks (and big fees). Simple provides a debit card as well as a checking and savings account, budgetary tools, money transfer, automatic bill pay and more. The funds in these accounts are held by Simple’s partner bank, The Bancorp Bank.
Simple has no overdraft fees, bounced check fees or account maintenance fees, though it does charge a $2 international ATM cash withdrawal fee and $8 treasurer's check fee (should you need these resources). There's also an additional $1 fee for “over-the-counter cash withdrawal” (you can use your Simple card at any bank branch for a cash advance of up to $5,000, withdrawn from your account, at the counter; this feature covers you in case you need more than $500 from an ATM). There is no cost to close the account.
Simple’s elaborate purchase tracking shows where your money was spent and how much (like a traditional bank does), but also provides in-depth interactive reports that track spending over time, making the data available by category and merchant (much like a budget app). With this feature, you’ll know exactly how much you spent each month without having to manually add up (or quantify) your expenses. Another feature, called Safe-to-Spend, automatically budgets for you by adding upcoming bills, scheduled transactions and other transfers to illustrate how much money you have left to spend.
Simple accounts are insured by The Bancorp Bank to at least the FDIC maximum (currently $250,000).
[Editor's note: Simple is not taking on new users at this time]
Apple Pay is technically not an app, but it functions a lot like one.
Apple’s latest venture, Apple Pay, nearly replaces your physical credit cards or debit cards for purchasing transactions. With Apple Pay, even opening apps to pay for purchases (think Starbucks) becomes a throwback. The feature (available on iPhone 6 and iPhone 6 Plus) detects corresponding readers (read: alternative payment devices) at checkout. You initiate the transaction by placing your phone next to the reader and approving payment via your Touch ID (your fingerprint) without ever having to unlock your phone.
Apple Pay stores a credit or debit card of your choosing (which you can enter manually or by photographing). Should your phone or device be stolen, you can reportedly use the “Find My iPhone” feature to suspend Apple Pay or wipe the device clean. Apple also swears up and down that the company doesn’t keep tabs on your spending habits or purchases.
Major banks like Bank of America, Chase, Capital One, Wells Fargo, Citibank and American Express are already on board, with other banks like U.S. Bank and PNC opting in next year. More than 220,000 stores, including Whole Foods, Bloomingdales and Lady Foot Locker (to name a few) are already equipped for Apple Pay.
Your grandkids will be amazed by those little plastic things you used to call “credit cards.”
- Free with device
- iOS 8
- iPhone 6, iPad Air 2 and iPad Mini 3 (Apple Watch in 2015)