We’re all getting savvier to how technology on our phones can help us to save money and better manage our spending, from app-based mobile banking, to apps that track your spending. App based banks or digital only banks, without a traditional branch, are becoming more and more popular, especially with younger users. Are these apps actually saving you money or are they just too good to be true?
What Is App Based Banking?
App-based banking or digital banking is banking via app-only banks, as opposed to traditional, high-street banks which also have an app to let you manage your account. These digital banks operate solely through their app, pushing you notifications about spending, savings and more.
Digital banking is becoming very popular. According to Mastercard, six out of seven people use digital banking at least once a month to check their account, arrange payments and more. These new app based banks might not have a physical branch for you to visit, but their customer support teams on hand twenty-four hours and their free to use apps are making them increasingly popular options, especially with younger people.
Can Digital Banking Help Me With Budgeting?
Most banking apps weren’t originally designed for budgeting, but actually, many of them can help you to keep a closer eye on your finances. Many of these apps will send you real time notifications every time you spend anything using your card, telling you what you spent, where you spent it and how much is left in your account, making it very hard to overspend and also alerting you very quickly if somebody else has used your card. You’ll have a better idea of your account balance at any given time if you don’t have to log in to the app to check every time you want to know how much money you have left.
Some of these apps can also be used to categorize your spending, giving you an immediate overview of exactly where you money is going, showing you how much you spend on things like eating out, or on transport every month. This can help you to see where you could be making savings or where you’re overspending. You can use these to make more informed decisions about how to change your spending habits, such as cutting back on entertainment costs if those seem very high in comparison to your other spending.
Is My Money Safe In An App Based Bank?
Before paying your money into any kind of bank account, you, of course, need to know and feel confident that it is going to be safe. In most countries, traditional banks will be members of a financial services scheme, which shows you how your money is protected in the event that the bank goes bust and has to close. Some of the popular apps will be part of the same schemes, but not all are, so tread carefully.
Some of the apps will have a license for managing electronic money, which usually means they hold your money in an account that is ring-fenced from their own operating cash, which is usually held with one of the main banks. If a bank like this went bust, if everything was done correctly, your money should be safe, as it was kept separately. However, this is not always the case.
Money paid into these banks isn’t counted as a deposit, so the rulings from these financial schemes to help you reclaim your cash would be done on a case by case basis. Before choosing to use an app based bank, do some research into their licensing and find out exactly how your money is being held.
Are App Based Banks The Best Deal?
What makes these app-based banks popular is the alternatives they offer to high street banks. They offer all the standard parts of a bank account, like a debit card, overdrafts, direct debits, and standing orders. On top of that, they offer easy to use tech features, like real-time push notifications.
Despite the ease, these apps don’t always offer the best deals. Many high street banks offer cash incentives for opening an account with them, or advantages like cash back on spending like bill payments. Check out all kinds of banks before making a decision, and remember, you can use an app based bank alongside a more traditional bank account with a high street bank.
Can I Save More Money With A Digital Bank?
These apps are designed to be as easy to use as possible for the customer, meaning that there are lots of built in tools to make things simple for the user.
For example, many of these apps will have functions to help you calculate how much you could afford to save or even ones that move extra money straight into your savings account, either on set percentages or by rounding to the nearest whole number, and sweeping the rest into savings.
This means that the app can build your savings without you having to think about it, which can help you to save more without putting in more effort.
What Happens If I Lose My Card?
Losing your debit card can be a real nightmare, but app based banking can be easier to manage if this happens. Most of these apps will allow you to block and unblock your card through the app, with either your PIN or fingerprint. This means if you can’t find your card after a night out, you can block it very quickly without searching through your bank’s website for the right number to call. You can also unblock it again if you find your card a few hours later in a different part of your wallet.
The app’s real-time notifications will also alert you if someone is using your card after you’ve lost it, letting you respond very quickly before a thief has managed to spend much money at all.
Some traditional banks are also adopting these options to block your card through their own apps, so don’t discount these services either.