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Banking with a free bank: these are the pros and cons
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Banking with a free bank – A number of new, often foreign financial service providers offer free banking services here. Think of transferring, paying, withdrawing limited cash and a (virtual) debit card. Is that convenient and reliable? And what should you pay attention to when you work with such a new, free bank?
Banking with a free bank
A bank account was obviously free a few decades ago. Nowadays you quickly pay three to six tenners a year. And those rates just keep going up. Last July, the price of a payment package at ABN AMRO went from 1.95 euros to 2.95 euros per month. And as of 1 January, ING also increased its cheapest payment package from 1.90 euros to 2.70 euros per month. The biggest increase ever.
Can such a bank account not be cheaper? Yes, it can even be done for free. And with a number of new, often foreign, mobile-only providers such as the German N26, the Spanish Openbank and the Lithuanian Revolut. With them you currently pay nothing for a basic package of banking services. This allows you to transfer, pay, withdraw limited cash and you get a (virtual) debit card.
Trade securities and cryptos like an exciting game
These new providers that offer banking services by smartphone are called neobanks. With such a neobank you do everything online and you are a customer in the blink of an eye. That sounds convenient and advantageous. But is it reliable and safe, even if it’s free?
“With a neobank, your money is basically just as safe as with another bank,” says Jeroen de Bel, founder of Fincog, a consultancy for digital banking. “Neobanks are under financial supervision. And if they have a banking license, then your money is simply covered by the deposit guarantee scheme.” (Banking with a free bank )
According to De Bel, the difference with established banks is mainly in the range of services on offer. “Neobanks make banking more user-friendly, cheaper and more accessible. Everything is simple and fast.”
Neobanks often make it very easy to borrow. That can be risky for people who shouldn’t.
That sounds ideal. Are there no disadvantages at all? “Neobanks often make it very easy to borrow,” says de Bel. “That can be risky for people who shouldn’t do that.” Also, some neobanks present trading in securities and cryptos as an exciting game. That can encourage people to trade excessively and cause investment losses.”
Furthermore, according to De Bel, it is sometimes difficult to get in touch with the customer service of a neobank via e-mail or telephone. “It has also happened abroad that the supervisory authorities intervened at a neobank, so that customers, to their horror, sometimes suddenly could not access their money for a while.” (Banking with a free bank )
How do you know which bank is right for you?
If you want to try a free neobank, you are faced with the question: which one do you choose? “First think about what you would like to use a neobank for. Is that for everyday banking, for example? Or do you want to be able to pay with iDEAL, pay cheaply in other currencies or travel?” says De Bel.
“Then check whether a certain neobank offers that and what it will cost you.” But even if you stay with your existing bank, you may be able to benefit from the developments around neobanks in the future, thinks De Bel. “Neobanks set the standard for the established market.” Traditional banks will have to follow with their offer and price.”
Check what is really free at neobanks
The Dutch Banking Association (NVB), the interest group of mainly the established banks, is also following the developments around neobanks. “It’s great that new banks operate here,” says Maurits de Nerée, digital finance advisor to the Dutch Banking Association (NVB). “It leads to diversity in the offer and to more competition in the market.” (Banking with a free bank )
De Nerée does not see major risks for your money when it comes to neobanks with a banking license. He does have a few tips for consumers. “If you like to pay on the internet via iDEAL, see if a neobank offers that. Also check what exactly your neobank does for free, and what does not. It may be that you can pin for free a few times a month, but after that it costs money. You have to decide for yourself whether that suits you.”
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