Chime’s program to help customers get their stimulus funds quickly has struck a chord — so much so that it’s expanding the effort to more people, but with a new restriction.
The challenger bank
Chime is the only fintech providing early access to stimulus funds free of charge, though PayPal, Square and others have offered to help the government disburse the funds. The company is also taking some financial risk in doing so.
Banks such as Ally, First National Bank of Omaha, KeyBank, PNC, Santander and Citizens Bank of Edmond in Oklahoma are waiving or refunding overdraft fees, but most are doing this on request.
Jill Castilla, the CEO of the $300 million-asset Citizens, said Thursday that there has not been much demand for her bank's overdraft protection option yet.
"But we've also been very liberal in paying items and waiving all overdraft fees,” Castilla said. “Since we're small, I think there's a high amount of trust that we'll work with customers that are having difficulty. Our economy definitely isn't financially OK, but there is a belief that we're here for each other through it.”
Banks soon may be forced to waive overdraft fees.
What Chime is doing is different than some banks’ practice of waiving overdraft fees. Chime’s service is automatic, not by request, there is no form to fill out and there is no government mandate. And Chime did not charge overdraft fees in the first place.
Five hundred customers took advantage of the pilot offer, though they sought only $150 to $300, Chime said. Hence the new limit of $200.
“The insight we got from our first pilot was that the vast majority of people did not want to access the full $1,200,” said Chris Britt, Chime's CEO. “In listening to our customers, through social media and direct feedback, a lot of people said they could use $100 or $200 to go to the grocery store one more time. We wondered if we could just reduce the dollar amount, since it appears people aren't accessing it anyway, and offer it to more people.”
The service is an expansion of Chime’s existing SpotMe feature, which lets customers make purchases even if their account has a zero balance, within limits. The service is only offered to customers who have their paycheck directly deposited into their Chime account. So Chime pays itself back when the next paycheck comes in. For the stimulus fund advances, customers must have had their latest tax refund deposited in their Chime account.
Chime is still taking a risk here. The company does not know for sure which customers are eligible for the government’s stimulus checks. Some might make too much income and not qualify. Others might have the funds garnished due to child support payments. It is possible customers could close their accounts after using the money.
Chime chooses not to have recourse on the money it advances through its SpotMe program.
“It's not considered a loan because there's no fee and no interest rate associated with it,” Britt said. “We're basically giving people these small dollars as part of our investment in the relationship.”
This might be Chime’s last stimulus advance program, given that the government payments are likely to come through next week, Britt said.
