These days, you can do pretty much anything online, from filing your taxes to ordering a pizza. As people become more and more comfortable conduction their business online, banking is also becoming a popular online operation.
Online banks, like the name implies, are banks without brick and mortar branches that are operated entirely online. Perks like higher interest rates and low or no fees make them an attractive option for many people who are fed up with their banks’ fees or subpar customer service.
If you’re considering joining the online banking movement, it’s a good idea to consider these pros and cons before making any big decisions:
Online Bank Advantages
There are a number of reasons people are switching to online-only banks. A few of the advantages include:
- Higher interest rates. Online banks tend to offer higher interest rates than their brick and mortar competitors for both savings and checking accounts. The main reason for this is the lower operating costs that are associated with online banks. Unlike a traditional bank or credit union, online banks do not have the heavy costs associated with running various branches. The savings that comes from eliminating costs such as rent, utilities, and even paper and postage are passed on to the customers through more competitive interest rates.
- Free checking. For most brick and mortar banks, free checking is a thing of the past unless you meet certain requirements, such as minimum balances or direct deposit. Online-only banks have no-fee checking accounts without any additional requirements.
- No fees. In addition to higher interest rates, the lower operating costs of online-only banks often results in fewer, if any, fees. This applies to ATM machines as well. Because there are no physical locations, many online-only banks will cover the costs associated for you to use ATM machines.
Disadvantages of Online Banking
Before you rush to close your bank accounts and switch to an online-only bank, consider these potential drawbacks as well:
- Potential hassle. One of the great things about conducting business online is the convenience factor. In some cases, online banking can be the opposite. If you don’t typically have your checks directly deposited and if your online bank doesn’t let you make free remote deposits at ATMs, you’ll have to mail them to the bank’s central location. This prolongs the amount of time your funds are available.
- Lack of human interaction. For some people, the idea of handling all their banking online can be off-putting. While online banks often have 24-hour customer support, there are plenty of people who prefer the comfort of having humans handle their transactions.
- Technological glitches. The Internet is not foolproof, and sometimes websites go down or undergo maintenance. This can completely limit your access to your accounts at times, which can be frustrating.
Choosing an Online Bank
If you do decide that online banking is the way to go, research is important. A few things to look for include:
- Certification. Make sure the bank you are considering is FDIC-insured. This ensures that no matter what happens to the bank, your money is still safe.
- ATM policy. Find out the bank’s policy on ATMs and whether or not you will be charged for using ATMs out of the bank’s network.
- Customer service. Because all-online banking is relatively new, you’ll want access to customer service professionals who answer calls promptly and courteously.
Taking your banking entirely online can be both convenient and offer savings. But they can also be a hassle if you’re not careful. If you’re considering online banking, make sure you do plenty of research to choose the right bank for your needs.