Affirm Money Review: Savings

What to know about neobanks: Nonbanks such as neobanks can be solid options for consumers who prefer managing money online and don’t mind having a nontraditional place to bank. But neobanks do have differences from banks that can pose risks, particularly in the way deposits are insured:

• A neobank such as Affirm is a third-party banking technology platform that partners with a bank to provide accounts to customers. Funds deposited at a neobank are ultimately held at the partner bank. The funds are FDIC insured in the event of the partner bank’s failure and only if the neobank maintained accurate deposit records. (Learn more about how neobanks work.)

• If a neobank goes bankrupt, there is no FDIC insurance involved. It’s up to the neobank to ensure customers get their money back, which may involve delays and potential loss of account access. Banks, in contrast, receive prompt assistance from the FDIC if they fail. (Learn about what can happen if a neobank closes.)

• Neobank accounts often have low monthly fees and earn strong rates. However, they may lack traditional banking features, including in-person customer service, wire transfers and access to personal or cashier’s checks (often required for large purchases, such as buying a home). Consider these details before opening an account.