Best Neobanks with Low Fees
In the past few years, the new trend of digital banking has been developing alongside traditional banking. The first neobanks began to appear after 2008. But only after 2014, when the digital platforms regulation rules were enacted, did they assume their full capacity. Today, more than 70 million users in the USA and Europe are clients of neobanks. And analysts estimate that in the next 3 years their number will have reached 100 million.
From this review, you will learn:
What are neobanks and why are they so popular;
Pros and cons of neobanks;
Products offered by neobanking platforms.
In this article, you will also find overviews and links to the best neobanks with spotless reputations and attractive service conditions.
Neobanks and challenger banks | Compared
Neobanks are digital platforms that don’t have physical offices and exist only online. All services, communications, etc., take place on the internet. A user can register from anywhere in the world anytime if a neobank provides services in his country.
Neobanks are primarily suitable for those who:
often travel on business to other countries;
like international tourism;
work with foreign counteragents;
make money as freelancers.
To open an account at a foreign bank, you have to provide a number of documents, including a resident card, etc. If you want to send money to another country, a regular bank may have questions pertaining to financial monitoring. With neobanks, everything is easier. You open an account on a bank’s platform in several minutes and work with it at your own discretion.
Neobank types
Platforms that provide banking services on the internet are generally called digital banks. There are several types.
1. Neobanks work exclusively on the internet and don’t have physical headquarters or branches. They don’t need a license and only provide the simplest services such as making payments. They don’t grant loans.
2. Challenger banks. There are several types:
Full-fledged licensed type. This is a combination of a neobank with a traditional bank. The bank doesn’t open branches but has the right to provide any type of service and observes redundancy rules, keeps multipliers at required levels, etc.
Affiliate type. A neobank undertakes online banking while working in partnership with a classic bank but the responsibility for everything rests with the latter.
Mixed type. A neobank gets a license for distinct services and works in partnership with banks and payment services.
The key factors for a client are a license from a financial regulator and an insurance fund for unforeseen circumstances.
Advantages
The advantages of neobanks over traditional banks are:
Absence of hidden fees. Traditional banks often include in agreements dozens of legally complicated conditions such as hidden fees. Neobanks display all their fees on their websites.
Simpler registration. No offices or queues. All services are provided online through an application.
Flexibility. Mobility and absence of bureaucratic obstacles.
Neobanks represent the FinTech sector. Their other advantages are the automation of transactions and personal financial solutions. In their neobank user accounts, clients can do what is carried out by bank agents at traditional banks, e.g., create and organize financial/transaction statements, optimize expenses, etc.
Some disadvantages
The main disadvantage of neobanks is that they operate in limited territories. For example, banks registered in the USA can only work with U.S. residents. However, payment cards from US banks will be accepted in Europe as well. Withdrawing cash from European ATMs or transferring money to other countries won’t be a problem either. Neobanks work with more than 100 countries. But if you are a resident of another country and live outside of the USA, the bank won’t open an account for you. The same goes for European neobanks. In the future, the problem of the correspondence of neobanks to the laws of separate regions will be resolved.
For some people, the advantages of neobanks may be disadvantages. A person who is used to live communication isn’t ready to trust his money to a website that may cease to exist at any moment. That’s why neobanks presently have fewer clients than regular banks but everything may change over time.
Best International Banks For Active TravelersTop 7 neobanks with minimal fees
This section contains overviews of the best neobanks. You will discover their services, pros and cons, as well as find their respective links where you can register and open an account with a few clicks.
Revolut
Revolut is one of the fastest-growing digital banks in Europe. The platform bills itself as a “home bank for proprietary capital management”. Its emphases are on its debit cards which are accepted in over 150 countries, budgeting services, and personal budget planning. Also, it offers unique services that are not typical of traditional banks such as pet insurance and investing in cryptocurrencies, stocks, and commodities.
Advantages of the Revolut digital bank:
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Free multi-currency accounts that allow clients to store up to 30 currencies. The fees for international transfers and conversion are minimal.
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Savings plans. The AER on savings accounts is up to 1.67%. Money can be withdrawn anytime commission-free.
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Payment solutions for businesses. Payment gateways for internet stores, access to OTC markets, payroll programs, etc.
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Investing with a low entry threshold starting at 1 USD (investing in stocks is only available for U.K. residents).
Some disadvantages:
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There are paid plans. To get lower fees and a savings account with the most favorable AER, you need to pay for a plan. This stimulates clients to make transactions in larger amounts and store more money in savings accounts.
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Fixed fees on separate types of international payments.
This digital bank is regulated by the FCA (United Kingdom).
Wise
Wise is one of the most popular digital banks that specializes in domestic and international payments. The platform doesn’t offer loans or APY on deposits. But Wise makes the fastest money transfers to nearly any place in the world with minimum fees. Today, this FCA-licensed platform has over 10 million users in 170 countries.
Advantages of the Wise digital bank:
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Worldwide presence and partnership with traditional banks. Using this neobank’s app, you can send money to almost any country in the world. And thanks to the partnership with national banks and payment systems, recipients can withdraw money with minimum fees without intermediaries.
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Low fees and complete transparency. The onboard calculator shows the final amount for the recipient including all fees.
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Feature set. The system offers multi-currency wallets in which you can store over 50 currencies and make domestic transfers.
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Reliable protection of electronic wallets. Since Wise was established, there have been no cases of client money loss resulting from hacks.
Some disadvantages:
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No loan products.
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Delays of transfers to some countries. Money transfers to some countries may take 3-4 days. But its terms and conditions are quite transparent about it.
The platform works with traditional banks worldwide and is a partner of such systems as Visa, MasterCard, and Western Union.
CIT Bank
The main service provided by this fully digital bank is capital accumulation. The platform has a separate line of savings accounts with a flexible rate schedule intended for different categories of clients. The only loan product is a mortgage.
Advantages of CIT bank:
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Reliability. State regulation and participation in the FDIC compensation program.
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No annual fee on debit cards. Multi-level APY on savings accounts and the return of commissions on cash withdrawals from ATMs in the U.S.
Disadvantage:
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Registration is only available to U.S. residents.
The main client category is people who travel outside of the USA relatively rarely and want to have access to their deposits at any time.
Bunq
Bunq is a relatively young bank, which bills itself as a platform for everyday payments and capital accumulation. Emphasis is placed on the possibility to store money in 16 currencies at 0.27% APY. Bunq’s partners are MasterCard and Wise.
Advantages of the Bunq digital bank:
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Flexible plans. The bank offers 8 plans: 4 for retail clients and 4 for businesses. Three retail plans with advanced features require a fixed monthly payment.
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The license is from the central bank of the Netherlands.
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Money can be withdrawn at any time regardless of the rate plan.
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Investment products. Two rate plans for retail clients include the possibility to invest in stocks.
Disadvantages:
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No loan programs.
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High cost of premium plans.
Verification is presently available in a limited number of countries but the platform is planning to expand the geography of its presence soon.
Monzo
Monzo is one of the first neobanks in the U.K. that got an FCA license and attracted more than 6 million clients. The platform is a payment system with a basic set of debit card services. There are several types of user accounts that determine the rate schedule. The basic services are domestic and international payments and short-term loans.
Advantages of the Monzo digital bank:
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Low fees. Thanks to its partnership with U.S. and European banks, clients can withdraw money from Monzo cards for free within the limits determined by user account types.
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Savings accounts with relatively high APYs: Up to 2.57% with saving on the tax rate on interest (individual savings accounts).
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Plans for businesses that enable clients to create virtual cards, set up accounting tools, etc.
Some disadvantages:
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Most services are only available to U.K. residents. USA residents can complete a limited verification.
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The most favorable conditions are offered to owners of paid user accounts.
There is a compensation fund with an insurance amount of up to 85,000 GBP.
Monese
Monese is a young British neobank operating in European countries. In 2016, the bank issued its first debit card, and today, it has over 1 million clients. Monese offers three plans, two of which have fixed annual fees. In paid plans, there are no fees on deposits or withdrawals within set limits, and conversion fees are reduced.
Advantages of the Monese digital bank:
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Instant transfers worldwide. The bank’s partner is the PayPal payment system.
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Short-term loans. To create a positive credit score, the bank offers small loans of up to 600 GBP at 28.2% APR without a solvency test.
Disadvantages:
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Limited number of currencies. The wallet only supports the euro, the British pound, and the Romanian leu.
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Relatively high cost of paid plans.
The bank is suitable for those who often make EUR or GBP transfers without conversion.
SoFi Bank
SoFi Bank is an online bank established in the USA in 2011. This is an all-inclusive digital platform, which provides nearly all traditional banking services. Here you can remotely take out any type of loan and get grace APRs on student, medical, and education loans. There even are unique wedding and travel loans. The platform also provides investment services and several types of insurance services. The features of the application allow you to buy shares and ETFs for $5 or more without commissions. There are products for large clients (budgeting, investment portfolio structuring) and for businesses (lines of credit, urgent short-term loans).
Advantages of the SoFi digital bank:
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Attractive plans. In terms of banking services, SoFi is on par with many traditional banks. But thanks to digital technologies, the bank has optimized administrative and operational expenses by reducing commissions and APRs for clients.
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Credit card powered by MasterCard. It combines reliability, freedom of action, and low fees. The card is accepted by many ATMs in the USA and Europe.
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Additional savings. Active participants of this digital bank’s community get discounts on confidential management plans, take free classes with career development specialists, etc.
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Unique line of products.
Major disadvantage:
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Registration is only available for U.S. residents.
There is a nice bonus. If you are a student and want to refund a debt to another bank, SoFi will give you $300 for that purpose.
Basic digital bank parameters compared.
| Digital bank | Loan rate | Credit rate | Supported currencies |
|---|---|---|---|
Revolut |
0.65%-0.7% | 6.45% |
30 currencies |
Wise |
No |
No |
54 currencies |
CIT |
Starting at 0.1% |
0.1%-1.4% |
USD |
Banq |
The bank does not provide loans |
0.09% APY |
Euro (16 European currencies in the Easy Money plan) |
Monzo |
0-19% |
1.16%-1.50% |
GBP |
Monese |
Individual |
28.2% |
GBP, EUR, RON |
SoFi |
1.89%-22.23% |
0.90%-1.50% |
USD |
Investment products of neobanks
Payment services are the most popular services used by most clients of neobanks. Investment products are the second most popular:
Savings accounts. It’s not always convenient to hold cash. It can be lost while traveling, a house can be robbed, and if you urgently need to make a transfer, fiat money has to be deposited to a card first. Therefore, it’s more convenient to already have money in an account. And neobanks pay more in interest than traditional banks.
Children’s accounts for those who save money for their children’s coming of age.
Investment accounts for earnings on securitized assets (stocks, indices) and cryptocurrencies.
You can invest in trading tools starting from 1-5 USD.
Neobank, traditional bank or payment system | What to Choose?
It depends on your purposes. Traditional banks are usually chosen by people with conservative views (who are used to human communication and don’t trust something intangible on the internet) and by those who need a full package of banking services such as investing, buying metals, lines of credit, payment processing, etc. That is, by people who are attached to a single country or region. That’s why the above question may be answered like this:
If you need debit cards, quick transfers, and cashback, choose payment systems. Also, they often are partners of traditional banks and neobanks.
If you need all-inclusive banking services, open an account at a classic bank.
If you need basic banking services with low fees, as well as speed, mobility, and around-the-clock access to your domestic or foreign account, choose neobanks.
Opening an account at a classic bank is not a quick procedure, while at a neobank, you can open an account almost instantaneously. The list of neobanks with the best conditions was provided above.
FAQ
Why should I choose a neobank instead of opening an account at a traditional bank?
Neobanks are better than classic banks in several respects:
Quick service provision. You can register with a neobank with a few taps right now regardless of your location. Verification takes only 10 minutes and approval takes up to 24 hours. No queues at bank offices. Your payment card is sent to your specified address. You can deposit and withdraw money in the same ways as with traditional banks: from ATMs, at partner branches, etc.
Transparency. At traditional banks, you sign agreements with nontransparent conditions and often with hidden fees. Neobanks explain all their conditions in a separate FAQs section.
More favorable plans. Compare APYs on deposits or fees on international payments at neobanks and regular banks. You will see the difference right away.
Conclusion. If you need payment tools for frequent domestic and international transfers, and if you want lower fees, higher cashback, and no total control over your account turnover, then open an account at a neobank
What are the basic banking services offered by neobanks?
There are narrowly specialized and all-purpose neobanks. They provide the following types of services:
Payments of all kinds: domestic, international, transfers within a system, etc. A neobank will send you a debit card. The line of debit cards includes issuing travel cards with cashback abroad, cards for everyday use, etc.
Savings accounts, similar to deposit accounts. If you don’t want to keep cash at home, open a savings account in 5 minutes. There are also savings accounts for children.
Credit cards. Not all neobanks offer them. The overdraft limit and APR are determined individually.
Capital management and investment services (buying stocks, cryptocurrencies) are offered by all-purpose neobanks.
Life and property insurance.
Long-term loans. Car loans, student loans, refunds, and mortgages. Only licensed neobanks can provide such services.
For legal entities, there are business plans with the features of managing accounts and virtual cards, drawing up payrolls, integrating banking apps with accounting software, drawing up invoices, integrating payment gateways with proprietary websites, etc.
How secure are neobanks compared with traditional banks?
So far, there has not been a single case of platform hacking through a neobank’s fault resulting in a loss of client money. Neobanks use the same protection methods as conventional banks: transferring data through closed channels, coding payment gateway data, etc. To sign in to a user account, a client needs to enter not only his password but also the code that was sent to his phone number or email. For additional identification, a platform may require visual contact (a client will need to show himself to a camera).
To protect your account from hacking, do the following:
Don’t open files or letters from unknown senders.
Don’t follow suspicious links.
When signing out of your user account, make sure not to save your password in the browser (if you signed in on another device).
Be careful with the websites you visit and don’t enter your card information or personal data on questionable pages. Remember, most scammers are proficient at phishing.
If you have lost a card or noticed attempts of unauthorized access to your user account on another device, immediately turn to your neobank support team. It will help to quickly change access codes and initiate a chargeback if necessary/possible.
How to open an account at a neobank?
Follow the instructions on the bank’s website. If your city is not on the list, it means the bank doesn’t operate in your region. If your city is on the list, you will need your passport or another ID document, social security number (identification code or its analogs), and confirmation of residence. You may need to confirm your address of registration or residence.
Team that worked on the article
Oleg Tkachenko is an economic analyst and risk manager having more than 14 years of experience in working with systemically important banks, investment companies, and analytical platforms. He has been a Traders Union analyst since 2018. His primary specialties are analysis and prediction of price tendencies in the Forex, stock, commodity, and cryptocurrency markets, as well as the development of trading strategies and individual risk management systems. He also analyzes nonstandard investing markets and studies trading psychology.
Olga Shendetskaya has been a part of the Traders Union team as an author, editor and proofreader since 2017. Since 2020, Shendetskaya has been the assistant chief editor of the website of Traders Union, an international association of traders. She has over 10 years of experience of working with economic and financial texts. In the period of 2017-2020, Olga has worked as a journalist and editor of laftNews news agency, economic and financial news sections. At the moment, Olga is a part of the team of top industry experts involved in creation of educational articles in finance and investment, overseeing their writing and publication on the Traders Union website.
Olga has extensive experience in writing and editing articles about the specifics of working in the Forex market, cryptocurrency market, stock exchanges and also in the segment of financial investment in general. This level of expertise allows Olga to create unique and comprehensive articles, describing complex investment mechanisms in a simple and accessible way for traders of any level.
Olga’s motto: Do well and you’ll be well!