budgeting

Is Chime the bank that #millennials want?

Est. 5 min read

When I opened up my first bank account on my own, I was given two ways to interact with my account: a debit card and a checkbook. The checkbook immediately went into a drawer, never to be touched again. I wonder how many trees died for that.

Banks have a problem with millennials – the 83.1 million Americans born between 1982 and 2000 – like me. According to one study, one in three millennials are open to switching banks in the next ninety days. Considering how much work goes into switching – moving your money, your direct deposits, getting a new card, moving any recurring subscriptions over – that’s a huge deal.

Even worse for traditional banks? 53% of millennials don’t think that their bank offers anything unique compared to other banks. To most millennials, checking and savings accounts are nothing more than outdated commodities. 70% of millennials believe that the way we pay for things will be totally different within five years. Why would you stick with a stodgy old bank when the future of money is about to change completely?

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Enter, stage right: Chime

There are a lot of places you could start with Chime, but let’s start with the obvious: Chime is a bank. When you sign up for Chime, you’re signing up for a checking account (they call it a “spending account,” since checks are about as outdated as you can get) and savings account. There are almost no fees – no overdraft fee, no monthly fee – and no minimum balance requirement.

That right there is enough to capture some attention from millennials. No one likes account fees or hidden fees or fees of any kind, and eliminating those to zero is awesome. Chime isn’t unique in this regard, however – another banking startup, Simple Bank, offered accounts like this way before Chime, as did countless other branchless banks like Ally.

But to say that Chime is just a bank is to discount two features that could convince millennials to make the switch.

A debit card with credit card rewards

Here’s another problem: millennials don’t like credit cards. There a million think pieces out there telling you why that’s good or bad and everything in-between, but the big takeaway is that millennials don’t like the idea of creating debt.

But millennials do like rewards programs, and they especially like rewards programs tied to their primary spending account, like cashback programs or a travel rewards system. Unfortunately for us, most debit cards don’t have rewards programs.

Chime, however, does. Chime’s rewards system isn’t as simple as a credit card’s flat 1% cash back bonus. Instead, Chime’s rewards system is closer to a coupon book. One example: a $3 store credit with any purchase at Sephora. Go into Sephora (or shop online) and you’ll get a $3 discount from Chime. You don’t have to do anything special – Chime recognizes where you made the purchase and gives you the discount directly in your account.

There is a version of cashback, referred to as “earned credit” by Chime. Like the store credits, these earned credits are tied to specific retailers. An example: a $10 earned credit when you spend $50 on Amazon. Both of these types of rewards come in limited quantities and are based on your location.

Are these rewards as good as a credit card? In my opinion, no. If you don’t shop at any of the retailers Chime has partnered with, the rewards program is pretty much useless. Some deals – like the $10 earned credit on $50 of spending – are pretty amazing, but they don’t represent the typical deal you’ll get through Chime.

Personally, I have no interest in giving up my credit cards. I can easily make over $20 in cashback rewards every month, and I just applied for (and received) a Citibank Double Cash Card, which pays you 1% cashback when you purchase something and when you pay it off. I like that I get a reward for everything I purchase, not just approved retailers.

But other people don’t want to deal with this – for starters, it can be a hassle to track how much you’re spending on your credit card every month, and it’s easy to get caught up in the idea of having free credit to make big purchases you can’t afford. For most millennials, a debit card with even a limited rewards system such as Chime’s is easier than a credit card.

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An automated savings account with a bonus

Chime wants you to save, and their feature for helping you save is dead simple and copied from a dozen other banks and apps. Basically, if you turn on Chime’s Automatic Savings feature, every purchase you make on your card will be rounded up to the nearest dollar. The difference will then go into your savings account.

For example: you buy a coffee at Starbucks for $2.75. Chime rounds that up to $3 and takes that extra $.25 and adds it to your savings account.

Chime offers a twist on this old formula. Every week, they’ll pay you an additional 10% on your weekly round ups. Another bit of math: if Chime automatically saves $20 for you this week, they’ll pay you an additional $2 on Friday.

And I thought I was doing pretty well when I got thirty cents in interest last month in my savings account. :’-(

I’m on record as saying that automated savings accounts are not good enough solutions to the very big problem of people not saving enough. In the case of Chime, however, I think they are trying to appeal to a millennial who doesn’t think they can save. This is different than the problem of just not wanting to deal with the hassle of creating a budget – they just think that with their student loans, auto loans, mortgages, and other debts, they don’t have extra money to put aside.

While I would argue that it’s better to teach people that they have the ability to save by making them more aware of how much money they have and where it’s going through budgeting, over 65% of millennials would rather have a way to automate it. Chime is responding to that and attempting to change habits by incentivizing the automatic savings feature in a big way.

In the future, I’d like to see Chime take a heavier hand in trying to get their customers to budget. Simple Bank’s budgeting features paved the way for this type of thinking, but their product has arguably stagnated since they were purchased by BBVA. I’d like to see Chime pick up the mantle and push the idea of integrated budgeting tools further.

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Is Chime good enough for millennials?

Chime understands how millennials feel about money, and is trying to react in a way that both encourages good habits and gives millennials what we want. Since they launched fifteen months ago, they’ve added new features – such as automatic savings and real-time transaction alerts – that specifically respond to needs and wants that millennials have.

If you’re a millennial looking for a new bank that’s focused on what you need, right now, at this point in your life, I strongly suggest checking out Chime. It’s already a good product, and I suspect that it will only get better in the months and years to come.

Published on January 28, 2016

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Adam Cecil writes for PolicyGenius, a digital insurance brokerage trying to make sense of insurance for consumers. You can read more of his writing on his site.
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