Chime Bank Vs. Traditional Bank: How Do They Differ?

chime vs traditional bank

Chime has gained popularity as a low-cost fintech company. However, we cannot ignore the fact that traditional banks have served us for decades.

Here are comparative details of the Chime vs traditional bank:

  • Chime Bank operations are available online-only, while a traditional bank has physical branches.
  • Chime Bank spends less on operational costs than a traditional bank, and that’s why it is more cost-effective for customers than brick-and-mortar banks.
  • Chime has a simple online-only account opening process, which most traditional banks don’t.
  • Chime Bank has fewer financial products to offer than a traditional bank. Chime is focused on day-to-day transactional banking.
  • Like some other digital banks, Chime offers credit building and get paid early products, which are usually not provided by traditional banks.
  • Chime doesn’t offer business banking yet, but most traditional banks do.
  • Traditional banks offer many more credit products, including overdrafts, different purpose loans, mortgages, which Chime doesn’t provide.
  • The banking hours in traditional banks are not always convenient. With Chime bank, you can access your banking service at any time.
  • Chime offers online and mobile app access to accounts. Traditional banks, on the other hand, grant online and app access when a client asks.

It is evident that there is much to these banking systems. Here are reasons why you should choose Chime or a traditional bank.

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My Recommendation

Both Chime and traditional banks have their financial benefits. I recommend Chime for customers who love digital-only banking, have minimal cash transactions, and looking for a cheaper banking model.

On the other hand, if you value in-personal service and deal with frequent cash deposits, a traditional bank will serve you better.

What To Consider When Choosing Between Chime vs Traditional Banks

Before you choose either, put these factors into considerations.

  • Loans

At the moment, Chime only offers up to $200 overdraft via SpotMe to eligible members. On the other hand, a traditional bank will offer personal loans, auto loans, student loans, home equity loans, and more. Therefore, if you need financial help, a traditional bank will serve you better.

  • Account Offers

With Chime, you can only open a savings or a checking account. However, traditional banks have multiple account offers. Here, you can open a certificate of deposit (CDs) or a money market account (MMA).

  • Early Paychecks

Traditional banks take up to four days to process a paycheck. Luckily, Chime takes even lesser days. You can receive your remuneration two days earlier than traditional banks.

  • Costs

If you are looking for a banking system that will cost you less, think Chime. It has zero monthly fees, overdraft fees and has automatic savings round-ups that save remainder dollars. Besides, you get free ATM withdrawals on Chime’s network.

  • Convenience

Do you need a convenient bank? Chime is more convenient as it works through a mobile app. But if you prefer a traditional bank, why not ask for their online banking feature?

  • Customer Service

Both Chime and traditional banks provide over the phone, email, and email customer service. But only traditional banks have in-service customer care options.

Why You Should Choose Chime

chime bank

Here are three reasons why you should choose Chime.

  • No Fees

Chime does not charge users for their monthly and international transactions, minimum fees, or overdraft fees.

In addition, after signing up, you need not make an initial deposit to activate it. What’s more, it offers free ATM withdrawals across the network.

  • Mobile Banking Application

Their mobile banking application gives you online access to Chime banking services. You can track your savings, daily transactions, and account balances. Besides, you can use the app to deposit paper checks.

  • Security

Chime mobile application is in line with the standard banking security standards. Additionally, Visa Zero Liability Policy protects their debit Visa.

What’s more, Chime has partnered with FDIC to secure your money.

Why You Should Choose Traditional Banks

Although traditional banks may seem too conventional and old, here are four benefits.

  • Convenience

Traditional banks have local brick-and-motor branches and accessible ATMs all over the country.

  • Offers a Variety of Options

With traditional banks, you can access services such as creating a personal savings account, checking account, business checking account, Roth IRA, or trust fund. In addition, you can get investment and wealth management services.

  • You Get the Best of Both Worlds

Most traditional banks are now offering online services. Therefore, you have the freedom to choose between walking into a bank or accessing your account online.

  • Cash Deposits

If you are a banking customer who transacts with cash often, traditional banks are your best bet. They make cash deposits more convenient.

Chime Bank History

Chime was founded in 2013 as a financial technology company. Chris Britt and Ryan King opened the digital bank as an alternative to traditional banking. Its headquarters are in San Francisco, California.

Both founders wanted to create an innovative approach to banking that would improve their clients’ financial lives. They drove their attention to young adults and millennials who were having difficulty paying for their banking relationship after the Financial Crisis.

Chime developed its financial products to achieve consumer’s best interests. According to Chris Britt, their bank’s goal was to align with consumer’s interests and not profit from their misfortune.

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It is no doubt that the bank acquired Pinch in 2018. The move was channeled towards helping millennials and young adults improve their credit scores through making timely rent payments to credit institutions.

As of February 2020, the fintech company had 8 million accounts holders.  It has received total funding of $1.5B. Bancorp Bank provides banking license.

How Chime Works

Chime is an online bank whose primary goal is customer satisfaction. But, how do they make money?

The company does not rely on interest loans, deposit interest margin, and bank fees like traditional banks do. Instead, it focuses on card interchange revenue. It turns out that this is a great way to monetize. How so?

Chime issues debit cards to its clients for in-person and online purchases. When a client pays with their Chime debit card, they do not incur any fees.

However, the merchant has to pay a small percentage of the sale to Chime and the card network. By doing so, the company cares for its clients.

Chime also makes money through interest on cash. Their clients can open a fee-free Chime savings account. Nevertheless, it charges 1% APY (Annual Percentage Yield) on the account balance.

ATM Fees also generate money for Chime. Consumers are charged any time they withdraw from an ATM outside VPA and MoneyPass networks.  There is a $2.50 fee for out-of-network withdrawals.

Features of Chime

Even though Chime does not possess a banking license directly, it has the following features.

  • SpotMe

The SpotMe feature allows you to overdraw your account when making purchases using your debit card. It is safe to say that it offers you an extra financial cushion. And here is the best bit, Chime does not charge overdraft fees!

Your account needs to receive direct deposits of $500 or more in the past month to enjoy this feature. The overdraft limit is $20 – $200+ and can be raised depending on your account use and history.

Unlike other banks that ask you to open a savings account as overdraft protection, SpotMe gives you up to $200 overdraft without a fee or savings account.

However, it is important to note that SpotMe only works with debit cards, not credit card purchases.

  • Chime Savings Round-Ups

Chime automatically rounds up your change when making purchases then deposits the amount in your Chime Savings Account.

Let’s say you spent $20.11 at the local store. Chime rounds up the total to $21. The additional $0.89 will be credited automatically into your savings account. This may not seem much, but it does amount to something after several months.

  • Checkbook and Automatic Savings

All Chime members can have direct deposits in their checking deposits. They can also create an automatic savings feature that places 10% of direct deposits above $500 in the savings account.

There is a Chime checkbook, too, that’s available on Chime’s online account and on mobile phones. It allows users to send a free paper check. There is a limit, though. You can only send $5,000 per single check and a total amount of $10,000 per month.

  • High Yield Interest Rate

Currently, Chime is among the best online savings accounts with an APY of 0.50%. Compared to standard accounts, this high-yield interest rate will grow your funds faster.

  • Get Paid Early

Paycheck days are much better with Chime. With Chime’s direct deposit, you can access your paycheck two days earlier than traditional banks.

  • Chime Credit Builder

This feature helps consumers improve their credit scores. Unlike traditional secured credit cards, Chime Credit Builder has no interest, credit check, minimum security deposit, and annual fee. With it, you do not spend more than the available funds in the account.

  • ATM Access

The bank offers free ATM withdrawals through MoneyPass and Visa Plus Alliance ATMs. The network has 38,000+ ATMs to help users access their money.

When consumers cannot access a Visa Plus Alliance or MoneyPass ATM, they can withdraw from other ATMs at a $2.50 fee.

History Of Traditional Banks

Traditional banking records can be dated in Babylon as early as the 18th century BCE. During this time, people would store their gold in temples. They were considered safe, sacred, and well built. There are records too of loans issued to merchants by temple priests.

Apart from Babylon, Ancient Greece also had traditional banking. There were financial transactions like validation of coinage, loans, currency exchange, and deposits. Ancient Rome also embraced and perfected the banking system by paying interests on deposits and charging loan interests.

There is evidence of traditional banking in the Late Antiquity as well as the Middle Ages. The Egyptians, Mesopotamians, Phoenicians, and Hittites would charge interest for ‘food money and monetary tokens.

Medieval trade fairs also played a huge part in traditional banking. Moneychangers would issue redeemable documents in exchange for currency. The papers would later become bills of exchange and could transfer large amounts of money.

In the 1500s, England had its breakthrough in Western bank history. The London Royal Exchange was founded in 1565. 

During this period, moneychangers had ‘bank’ offices located in trade and commerce centers. They would sell bills of credit to business individuals who engaged in lucrative trade, which led to growth in the banking industry. In the 1700s, European banks would meet capital needs.

The USA also had noteworthy bank improvements in the 17th century. The Bank of North America became the first chartered bank in 1782 and the Bank of New York two years later.

In early 1800, the US had more than 400 banks, thanks to the economic boom. They would print banknotes and lend money. This would change in 1819 when the Second Bank called its loans, and most banks failed.

Then came the bank panic in 1937 that resulted in a lack of confidence in many state banks. There was speculation about removing federal funds, distributing federal funds, and using gold and silver coins to buy public lands. Sharp depression followed the bank panic, but things improved from 1841.

Since then, there have been numerous remarkable milestones in traditional banking. For starters, the dollar was acknowledged as the national currency in the National Banking Act in 1864.

In 1900, checks became more common and acceptable as payment. From 1946, people could conveniently carry credit cards. The 1980s and 1990s saw a proliferation in capital marketing and global banking services.

Today, the traditional bank has embraced emerging trends, the latest being online banking and mobile banking.

How Traditional Banks Work

Bick-and-mortar institutions control money flow between people and businesses. The banks offer secure deposit accounts for consumers. In return, they use the deposited money to lend loans to other people. Traditional banks charge interest on loans, which is their primary means of making money.

They also make money from charging overdraft fees, ATM usage fees, mortgage fees, auctions, interbank lending, penalties, credit card fees, annual fees, and broker fees.

Are traditional banks regulated? Yes. The Federal Reserve System ensures that banks and financial institutions follow the stipulated guidelines. Other regulatory agencies include the Office of Thrift Supervision (OTS), Office of the Comptroller of the Currency (OCC), and Federal Deposit Insurance Corporation (FDIC).

Features of Traditional Banks

Here are the features of traditional banks.

  • Mortgages

Unlike many online banks, traditional banks give mortgages. A mortgage is a loan intended to buy or maintain a home. The borrower agrees to pay the mortgage over a specified time while the property serves as collateral.

  • Leasing

Traditional banks also offer leases. They provide those customers who reach or surpass their defined credit limits with financing without risking defaulting. You can get financial, operating, import, international leases, and more from a traditional bank.

  • Investment Services

They also offer investment services to investors. The banks have financial advisers who recommend suitable products and services free of charge or at a fee.

  • Loans

Traditional banks are known for offering their clients loans. It can be a personal loan, business loan, or student loan.

  • Online Banking

Lately, traditional banks are allowing consumers to access and manage their finances online. Some of the services include mobile check deposits, online bill pay, eStatements, and text alerts.


When it comes down to Chime bank or a traditional bank, each has excellent features for you.

If you are looking for an online-only, low-cost, and convenient banking system, Chime is the best option. In addition, it is excellent for people with paychecks.

But if you need a bank to make frequent direct deposits or need several accounts, choose a traditional bank.

Related Questions

Is Chime a Real Bank?

No. It is a financial technology company that is yet to receive a banking license. Nevertheless, it is a safe place for your money as it has FDIC insurance.

What Should I Do When My Chime Account is Closed?

If Chime sends you an email about closing your account, move quickly and straighten things. You can email them at Alternatively, you can contact them on social media or call 844-244-6363.

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As a Current mobile banking app affiliate, I get a commission at no cost to you if you decide to sign up through my links.

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As a Current mobile banking app affiliate, I get a commission at no cost to you if you decide to sign up through my links.