Updated: Oct. 12, 2018: Simple is an online bank that doesn’t want you to call it a bank. "The public’s trust in banks is at an all-time low. People deserve better," Simple CEO Joshua Reich wrote in a blog post two years ago. But is Simple giving people a better alternative?
I started using Simple Bank over a year ago after becoming increasingly frustrated with TD Bank, People’s United, and Santander. Hidden fees ate into my limited student income, and my savings account was a joke. The promise of Simple was enticing: no fees, no minimum balance, built-in budgeting and savings tools, and an iPhone app that actually worked.
But do the benefits of Simple Bank outweigh its limitations? Is it that much better than a traditional bank, or even other online banks? In this article, I’ll go through my experience with using Simple bank, as well as reviewing its major features and limitations.
Unlike most banks, Simple Bank lives entirely online. That’s one reason why Simple can afford to operate without fees: there are no costly locations to maintain and staff. Simple isn’t completely fee free, but it does eliminate many of the most common bank fees. There is no monthly maintenance fee, no minimum balance requirement, no overdraft fee, and no funds transfer fee.
Your window to Simple is their web and mobile apps, which I’ll review below. Simple isn’t the only bank with an online interface, however - most banks these days have a mobile or web app that customers can use to track their accounts. Not only that, but an astounding 80% of all customer interactions at retail banks take place over self-service channels such as a mobile app or ATM. A third of retail bank customers haven’t visited a branch in the last six months, with a fifth of all customers not visiting in the last year. Banks are shedding physical offices every year. The era of branch expansion is over.
That’s not to say that branches can’t be useful, however - over 50% of traditional bank customers have visited a branch location in the last six months. They're still the dominant channel for new customer acquisitions. In 2012, bank branches accounted for as many as 95% of all new account openings. Somewhere between 45% and 55% of customers told Bancography that they chose a branch based on "convenience of locations." The Financial Brand interprets these statistics by rejecting the idea of channel replacement. "Each time the banking industry has given consumers a new channel, consumers have said ‘thank you, I’ll use that, too,’ and simply reallocated their transactions among a broader array of channels… The institution that seeks to replace branches with digital channels is constraining consumer choices just as severely as the institution that offers only branches."
While online banks may not be for everyone, they do offer a few advantages over traditional banks. With no locations to maintain, fees can be eliminated, and existing resources can be spent on continually developing the mobile and web apps. Online banks also tend to have higher interest rates and better customer support. Minimum balance requirements also tend to be lower, making online banks more friendly to low-income and younger customers.
The only physical thing you get from Simple Bank is their Visa debit card - the Simple Card - an appropriately stark white rectangle. Simple Bank doesn’t have any ATMs of their own, but they have partnered with STAR to give their customers 55,000 surcharge free ATMs. For a long time, the closest ATM to me was inside of a McDonalds, but STAR also has ATMs in CVS Pharmacies, bars, and even a fancy juice place around the corner from the PolicyGenius office.
Simple isn’t the only online bank in the game. Schwab and Ally are two banks I see recommended on online forums most often, and for the purposes of this article, I’ll use them to represent the larger world of online banks that are available. Both of their free checking accounts are comparable to what Simple offers (minus Simple’s unique features, which I’ll review below). PolicyGenius CEO Jennifer Fitzgerald has been a Schwab customer for years, and so far, she’s very satisfied with the bank, describing both the account and customer support as "A+." Both Schwab and Ally will reimburse any and all ATM fees, though other online banks do have a cap on what they’ll reimburse.
Though Schwab and Ally are both online banks like Simple, their offerings are more in line with a traditional bank than Simple. Along with a free checking account, Schwab offers savings accounts and home loans, not to mention its variety of trading, investment, and wealth management services. Ally offers savings accounts, CDs, IRAs, and auto financing along with their free checking services. It’s unclear at the moment whether Simple is hoping to expand into these offerings. Though Simple’s Goals features would seem to replace a traditional savings account, other services could be offered through their owner, BBVA, a multinational banking group. In his write-up on the acquisition for The New Yorker, David Wolman suggested that Simple CEO Joshua Reich is interested in expanding into new financial services, though nothing has been announced as of yet, and Simple refused our request for comment.
Taking a page from Mint.com and other budgeting tools, Simple has built budgeting software into its web and mobile apps. No longer do you have to export information from your bank into a separate tool or manually enter information into a spreadsheet - now, every transaction can be described, tagged, and categorized, all without leaving your bank’s app. The web app then makes it easy to see reports on where your money is going.
Simple does not, however, make suggestions to users on how to change their habits. Spent more money on Seamless than at grocery stores last month? Simple will give you that information, but you have to go searching for it. There’s no way to set limits on certain vendors or categories automatically. Mint.com allows you to set budgets for certain types of spending, and will warn you when you’re reaching the limit or when you’ve gone over. Mint.com will also pull in information from multiple accounts, including credit cards and investment portfolios, allowing you to see a bigger financial picture than what Simple offers.
Despite its limitations compared to products like Mint.com, Simple does have a major advantage by being built-in to the bank account. To bastardize a phrase, the best budgeting software is the one you actually use. With Simple, you’re using their budgeting tools every time you make a transaction or check your current balance. Personally, I’ve never been able to stick with a third-party money management tool for longer than a few months, so Simple’s built-in tools make it easier for me to commit to budgeting.
Wrap-Up: If you’ve tried using budgeting software in the past and it didn’t stick, Simple’s built-in budgeting tools may be the kick in the butt you need to finally think seriously about money management.
Instead of curbing spending, Simple focuses more on saving. Goals, Simple’s best feature, will automatically take money and save it for you. Want to set aside money for a vacation or for Christmas presents? Set a date, set the amount, and Simple will automatically take out money every day to fill that goal. In some cases, it can be as little as a dollar per day. How does Simple know you won’t spend that money? A feature called Safe-to-Spend, Simple’s reimagining of a current balance, tells you how much money is free in your account. Goal money is kept out of Safe-to-Spend, encouraging users to literally compartmentalize their money in a way that "current balance" doesn’t represent. When it comes time to spend money from a Goal, Simple lets you set transactions as coming from a Goal rather than your Safe-to-Spend. You can also archive Goals to return the money to your Safe-to-Spend.
Safe-to-Spend also puts aside money for pending charges. While most banks leave current balance unaffected until charges go through, Simple recognizes that pending transactions are still transactions, no matter how long it takes for them to be finalized. One area where this has proved controversial, however, is with restaurants and gas stations. At restaurants, servers will usually swipe your card before you decide what your tip amount is, leaving the finalized charge higher than the pending charge. Simple overcompensates for this by automatically taking a certain percentage of the restaurant’s charge out of your Safe-to-Spend.
Other users and I have found this frustrating - Simple will often take out too much in an attempt to cover larger tips, and there’s no way to tell them exactly how much you tipped until the charge in finalized. Gas stations are even more frustrating. Most stations will place a pending charge of $75 on a card until the final charge goes through. That means no matter how much you spent on gas, your bank account will be down $75 until the charge is finalized. It’s an understandable attempt to safeguard users from overdrafting, but it’s a far from perfect feature.
Wrap-Up: Simple’s Goals and Safe-to-Spend features are designed to protect users from themselves, but the way that Simple handles pending charges is frustrating and unhelpful for many users.
Simple is probably too simple for most consumers. Statistics show that bank customers like having options. More than anything, people like the ability to choose how they’re going to interact with their bank. For many consumers, Simple and other online banks are off the table immediately.
But if you don’t mind limiting yourself to a digital only banking experience, online banks can be rewarding: low fees, high interest rates, and stellar customer support when you need it. Simple, especially, is great in this regard: their free checking account has almost no fees and incredibly flexible customer support that can be reached by phone or directly through their mobile and web apps.
Because Simple’s services are limited to a checking account, many customers looking for a bank might find that Simple is lacking in their basic requirements. But features such as built-in budgeting software, Goals, and Safe-to-Spend make the service worth a second look, at least for a secondary account.
If you’re like me - young, digitally-minded - Simple is a perfect first step to teaching you how to manage money, set savings goals, and stick to a budget. Consumers looking for more advanced financial options - like loans, mortgages, CDs, or IRAs - will find Simple severely lacking.
So far, Simple has been a great bank account that lets me hold on to my money and not waste it on fees and other hidden charges. However, unless Simple grows up along with me, I anticipate a time coming where I’ll have to cut it loose, or at least open a new account at a full-service traditional bank.
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