5 Alternatives to big banks

May 25, 2022


Traditional banks may not be suitable for everyone. Alternative banking providers might be able to offer financial services with better features and lower fees.

Customers choose to move away from traditional brick-and-mortar banks and choose non-traditional financial technology and banks.

Account fees, minimal savings rates, and impersonal customer service. There are many reasons why you might leave a large national bank, but it might not be the right decision for you.

Many of the largest U.S. banks have the same advantages, such as large networks of bank-owned ATMs and branches and solid mobile apps. They also have many of the same disadvantages, such as high overdraft fees, low savings rates, and other drawbacks. These four alternatives to large banks offer different benefits that may better suit your needs.


Are you looking for the best alternative to banks? This guide will help you find modern banking options.

What alternatives are there to big banks?

Before we begin, it is essential to note that some bank alternatives may not offer the same range of services and products as traditional banks. To get the best deals on all services, you might consider using a variety of specialist providers.

Some services do not offer standard checking accounts. Others specialize in specific areas, such as ways to save money and access higher interest rates. Other services focus on low-cost currency services. A few also provide easy ways to borrow through peer-to-peer lending. Let’s take a look at the top alternative banks.

1. Credit unions


Credit unions are run for customers’ benefit, not shareholders’ profit; they differ from banks. Although credit unions can charge lower fees to their account holders, they may not offer as many products and services to customers as traditional banks.

Credit unions can serve customers who have a bond or association. This means that customers have something typical, such as where they live, work, or connect to a charity. Credit unions tend to be more local than national, which results in smaller branch networks. Some credit unions serve veterans, military personnel, and families, such as the Navy Federal Credit Union.

Before you consider joining a credit union, it is vital to determine which ones you are eligible for. Credit unions often offer membership opportunities to family members of existing members. This is why it’s good to check if anyone in your household has credit union accounts.

2. Online banks & neobanks

Online banks and neobanks have seen a massive rise in popularity in the last few years.

Online banks don’t typically have branches. All services can be accessed online, via an app, or phone. An online bank will likely have its bank license, just like a traditional bank. Neobanks are often financial technology companies that work with licensed banks to protect customer funds. The terms can be interchanged, but you should verify the details of any service you are interested in to ensure it is safe and legal.


Online banks and neobanks may offer niche services such as currency exchange, international payments, credit or loans, and products for underserved customers. The services and products provided by other providers are similar to a regular bank.

3. Certificates for deposit

You might want to consider Certificates of Deposit (CDs) if you are looking for an alternative to banking and want to earn higher interest on your savings. Many banks and credit unions offer CDs. These allow you to invest funds for a set period in return for an agreed interest rate.

Rates offered by different providers will differ depending on what you pay and how long you want to keep it. CDs can be provided for a few months up to five years.


4. Money market mutual funds

Certificates of deposit require that you lock your money away for a more extended period. A money market mutual fund may be a better option if you are looking for a steady rate of return on your savings and need quick access to your money.

Money market funds invest only in highly liquid, high-quality assets. Many money market funds invest in government-backed assets for security and peace of mind. These funds can be pretty reliable as they usually return a steady rate of returns – however, like any investment, it isn’t always guaranteed. The rate of return for money market funds can be pretty low, so the money you make could be affected by rising living costs. Money market mutual funds are still a popular choice, not least because you can get your money back whenever you need it.

5. Peer-to-peer lending

This is the last banking option that may be available to you if you need a loan or have extra cash and want to put it to good use. Lending Club, a peer-to-peer lending platform, brings together lenders and borrowers.

You can apply for a loan by providing details about your financial situation and the amount you require. Investors, usually just regular people, will offer loans that they can fund with their savings. Peer-to-peer lending sites often provide credit rating services, which allows investors to choose to lend to those with a lower risk profile. This can help investors earn a higher rate of return than regular banks. It can also allow borrowers to access funds they don’t qualify for with traditional banks.

Is there a risk to saving money somewhere other than a savings account?

It depends. You could lose some or all your money. You must adhere to high yield checking accounts rules, such as minimum account balances or limited withdrawals. The FDIC does not cover peer-to-peer lending.

What is the best place for me to save my money?

While opening a savings account at your bank can be convenient and safe, there are downsides. Individuals who save money in savings accounts miss out on higher interest payments than a certificate of deposit or a high yield savings account.

What are some of the benefits of using a savings account?

Although you won’t get as much interest if your money is in savings, many benefits are. You can ensure that an FDIC member bank fully provides your cash. There are no penalties for withdrawing early or having a lower minimum balance.

Final Thoughts

Many alternatives to traditional banks are available. These options can offer many of the same financial services as brick and mortar banks but with lower fees and more features. Depending on your needs, you may find that one or more of these alternatives can help you manage your money more efficiently and cost less overall.