Free Bank Accounts at Walmart?

Are You Unbanked?

Walmart quietly entered the online banking business a few years ago, partnering with GoBank to offer free* checking accounts with online bill payment, a Mastercard or Visa debit card, a U.S. network of 42,000 no-fee ATMs, direct deposits and a mobile image-capture app for depositing paper checks, plus the ability to deposit cash at the cash registers of nearly every Walmart store (Vermont and Wyoming excluded).

Should Chase, Wells Fargo, and other big banks be worried?

Not really; Walmart is not going after customers who need the full spectrum of traditional banking services. GoBank, an FDIC-insured bank since 2012, offers only checking accounts. No savings accounts, CDs, or loans are available. It’s just a place to park money you intend to spend soon. GoBank is owned by Green Dot Corporation, the company that launched the prepaid debit card industry in the year 2000.

The target market of GoBank is the estimated 8.4 million “unbanked” American households who either don’t want or can’t get traditional bank accounts. GoBank does not check credit histories or the Chex System database of people who have bounced checks. It only verifies account applicants’ identities and residences using Social Security Number and third-party databases. GoBank is only for Web and mobile device users; accounts can be accessed only via the bank’s website or mobile apps for iOS or Android smartphones.

Anyone considering a GoBank account should read the bank’s user agreement closely. For example, “free” checking is free only with $500 or more in direct deposits during a given month; otherwise, you’ll be dinged $8.95. A fee of $5.95 applies when you deposit cash into your account at Walmart. Paper checks deposited via the mobile image-capture app are subject to a 10-day hold period. There’s a foreign-ATM fee of $2.50 in addition to any fee charged by the ATM holder, and if you use your debit card to buy from a non-U. S. merchant, a 3% surcharge applies. On the plus side, they do not charge hefty fees that most other banks do. GoBank says they "don't want to profit from your slip-ups," so there are no overdraft fees, penalty fees or NSF (insufficient funds) fees.

For most people, GoBank is not the best choice for online-only checking accounts. Here are some others that are rated higher:

Other Online Checking Account Options

Ally Bank offers interest-bearing online checking accounts, a vanishing breed in today’s banking market. As of this writing, account balances below $15,000 earn 0.10% APR while larger balances earn 0.60%. That’s a pittance, but a bigger pittance than most banks pay.

CapitalOne 360 offers checking and savings accounts. Interest rates are a bit higher here: 0.20% for balances up to $50,000 and 0.75% for balances from $50,000 to $100,000. The only potential fee is $25 to stop payment on a transaction. There are no punitive overdraft fees, but a negative balance is charged interest at an annual rate of 11.25%. You can withdraw cash at about 40,000 no-fee ATMS, but there is no way to deposit cash. With their mobile app, you can upload photos of checks to make a deposit from your smartphone.

Simple offers checking and savings accounts, and tops the field by paying 30 times the national average with a 2.02% APY interest rate. You can add money to your Simple account by direct-deposit ofyour paycheck or by transferring funds from another bank. Create a budget and Simple will tell you how much of your balance is “safe to spend” without running short at the end of the month. Simple also pushes notifications to your phone for all transactions, which can make fraud easier to spot.

Credit unions and community banks should not be overlooked in any search for customer-friendly, no-fee or low-fee banking services. They offer online accounts, mobile banking, and loans too, often at rates lower than those charged by big banks.

Does an online-only bank appeal to you? Have you found one you like? Your thoughts on this topic are welcome. Post your comment or question below...