If you haven’t considered using an online bank, you are missing out. Online banks are completely online and typically don’t have any brick and mortar locations. Additionally, they still provide all the federal protections on your account as a traditional bank.
When online banks first opened, they were the leaders in technology. They offered mobile deposits, online bill pay, peer to peer transfers and 24/7 hours. Today most banks will offer these same services online. However, some smaller banks still don’t offer these services. Also, many traditional banks have mobile interfaces that are lacking to say the least.
Most online banks offer checking, savings, CD’s and loans but with a few major differences. As well as all the standard services, most online banks offer access to a large network of ATM’s.
The top 3 reasons to consider switching to an online bank:
1. Totally free checking
Online banks offer no fee checking accounts. Compare this to traditional banks where it is nearly impossible to have any free accounts anymore. Online banks generally offer much lower fees for everything. These can include account minimums, better overdraft fees and options, and waived fees on out of network ATM’s. In fact, some banks offer no fees of any kind, including overdraft fees.
2. Higher interest rates
The advantage of being online means these banks have much less overhead. With no brick and mortar locations to maintain and staff, online banks can pay much higher interest rates. While the 0.75% you can find on checking accounts might not sound like much, compared to the 0.01% or less that traditional banks pay, it’s huge.
It’s not just checking accounts that pay higher interest rates. Across the board, savings, money market, and CD’s pay a better interest rate going with an online bank.
The large traditional banks have proven time and time again that they don’t care about customers. The ongoing saga of Wells Fargo is a perfect example. While big banks have promised to clean up their acts, does anyone believe them? It is unlikely that the issues are only with Wells Fargo. In today’s world employees shift from company to company. Additionally, profitable business practices move throughout an industry quickly.
While small banks do offer a more personable experience, the trade-offs can be considerable. The online banking experience with a small bank can be poor or even non-existent. In today’s fast moving world, having the ability to do mobile deposits, online bill pay and quickly transfer money can be important.
To date, online banks have provided the best level of service with no credibility issues.
Drawbacks of an online bank
While the advantages of an online bank are clear, there are a few drawbacks.
The most important drawback to consider is cash. Not withdrawing cash but depositing it. There is simply no easy way to deposit cash into an online bank. If you need to deposit cash often, an online bank is not a good option.
The other important consideration with online checking is the lack of physical locations. Some people want the face to face interaction with a real person. If you are one of these people, online banking isn’t for you.