A growing number of Britons are being forced to turn to digital-only banking following the closure of local bank branches.
Up to 16% of Britons have opened or plan to open a digital-only checking account due to the closure of traditional bank branches in their area, according to a study by comparison site Finder.
Big banks have closed 5,355 branches since January 2015, according to consumer group Which?.
Smartphone banking: Over the next 12 months, an additional 10% of people said they plan to open a digital-only bank account, according to Finder
Already this year, 102 bank branches have been designated for closure. If closures continue at this rate for the rest of the year, they will likely eclipse the 619 figure for 2022.
Overall, a quarter of adults currently have an account at a digital-only bank, compared to just 9% of the population when the study was first conducted in 2019.
This is not surprising given how quickly some of the online-only banks have grown in recent years.
Monzo claims to have attracted more than 7 million customers since its launch in 2015, while Starling Bank has attracted around 3.5 million customers since 2014.
JP Morgan’s banking brand Chase, which launched in the UK in September 2021, raised over $1 million in its first year.
Over the next 12 months, an additional 10% of people said they plan to open a digital-only bank account, according to Finder.
Bank branch closures are unlikely to be the sole reason for the growing number of people creating digital-only bank accounts.
Digital banks offer some of the best savings rates that are easy to access at a time when many leading banks are paying below standard rates.
For example, Kroo pays 3.03% interest income while Chase and Monzo both have linked instant access savings accounts paying 3%.
Digital-only banks also almost always allow free transactions abroad, which many top-tier banks do not.
Many major banks charge transaction fees when using their debit card abroad. For example, Lloyds and Barclays charge 2.99% while NatWest and HSBC charge 2.75%. They will also typically charge ATM withdrawal fees.
UK digital-only banks tend to spare their customers those sneaky fees.
We decided to take a closer look at the four most popular digital-only bank accounts currently available to Britons.
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Zoom in and click on the colored icons to see which banks will close in 2023
Source: major banks
What is this?
Chase is part of US financial giant JP Morgan and launched in Britain in September 2021.
In its first year of offering UK bank accounts, it attracted over a million customers.
However, it is by no means a new player in the banking scene, as it also has 56 million digital customers in the US and its parent company JPMorgan manages trillions of pounds in assets.
Looking for customers: Chase attracted over a million Britons in its first year in the UK
- 1% cash back on card spend for 12 months (capped at £15 per month)
- Money back offer runs for a year if you deposit £500 per month into the account
- Access to an easy access linked savings account paying 3%
- Round up transactions to put savings on autopilot with 5% interest
- From April 2023, you can earn 1% interest on current account balances
- There is no charge for using the Chase debit card abroad
- It also features a numberless card for an extra layer of security
- Apple App Store: 4.9
- Google Play: 4.6
It should be noted that you will need a relatively new smartphone to run the account.
Beware of the savings tax trap
Many savings transactions pay more interest than before, but these increasing returns also mean that many more savers pay taxes.
Any savings interest basic rate taxpayers earn above £1,000 a year – the Personal Savings Allowance – is taxed.
Higher-rate taxpayers get a £500 allowance, while extra-rate taxpayers get nothing.
Your smartphone will need to be running iOS 14 and above, or have access to Google Play on Android 8.1 and above, which means some devices are not supported due to hardware limitations.
The bank also doesn’t currently offer joint accounts, so this won’t necessarily work for everyone.
Chase does not allow overdrafts, so the limit of payments you can make is the amount you have in your account.
What is this:
As far as online-only banking goes, Monzo has one of the longest histories and largest customer base.
It was founded in 2015 and claims to be the UK’s largest digital bank with over 7 million customers, adding 150,000 new ones every month.
Big player: Monzo was founded in 2015 and claims to be the UK’s largest digital bank with over 7 million customers, adding 150,000 new ones every month
- Monzo has a 3% linked instant access account
- Instant expense notifications and spending budgets for things like groceries
- Categorizes expenses into groups such as transportation, groceries, and dining out
- No charge for using the card abroad
- Apple App Store: 4.6
- Google Play Store: 4.1
There are three types of personal checking account to choose from: the standard free account, the Monzo Plus at £5 per month and the Monzo Premium at £15.
Most people opt for the free account. The other two accounts offer extras such as phone insurance or rounding up spare change in savings.
Overdraft rates are 19%, 29% or 39%, depending on credit rating.
What is this:
Originally a smartphone-only bank with an offering primarily aimed at holidaymakers, Starling has increasingly become a legitimate and profitable challenger to Britain’s biggest banks.
It currently has more than 2,000 employees and serves approximately 3.5 million current account customers.
It has consistently gained the most net accounts through the Official Current Account Changer Service since the start of 2020.
Most popular: Starling Bank among the best current account providers at the British Bank Awards this year
- No fees abroad
- Instant payment notifications
- Round transactions to put savings on autopilot
- Your classified expenses
- Instant Card Lock Security
- Share the bill with your friends
- Apple App Store: 4.9
- Google Play: 4.5
Starling offers an arranged overdraft option. Rates are charged at 15%, 25% or 35% depending on credit score.
What is this:
Although founded in 2016, Kroo is very much the newcomer, having launched its checking account late last year after obtaining a full UK banking licence.
Kroo also aims to woo people by promising to plant two trees for every account opened, with the goal of planting one million trees by the end of 2023.
Join the Kroo? The digital challenger bank has raised interest rates on current accounts to 3.03% on balances up to £85,000
- It pays 3.03% credit interest on balances up to £85,000
- No additional costs when spending abroad
- It will plant two trees for each checking account opened
- The bill splitting feature allows its customers to spend, track and settle with friends
- Instant expense notifications
- Breaks expenses down into categories, such as transportation, groceries, and dining out
- Apple App Store: 4.7
- Google Play: 4.4
As a newcomer, this is the least tested of the four bank accounts. Long wait times have been reported due to high demand from those wishing to register.
Kroo offers an arranged overdraft option. The rate is 24.9%.
THESE ARE FIVE OF THE BEST MONEY CURRENT ACCOUNTS
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