As corporations and academic institutions are gradually establishing themselves online, so are banks. Online banks operate entirely without having any established branches. Are you one of those who doesn’t want to bank from the comfort of your home – without the need to visit physical branches? Online banks may be the right fit for you then.
They do not have any physical presence, and offer several benefits that you would find missing from traditional banks.
Since these banks do not have a brick and mortar presence, they save on significant costs – which they can pass on to their customers. For instance, you may not have to pay a monthly fee, and you can perform all banking actions online.
What Is Online Banking?
Online banking refers to managing your bank account online with the help of your phones or computers. Banking facilities like fund transfers, depositing checks, making online purchases and electronically paying your bills are available in Online Banks.
Existing traditional banks and credit unions now provide account access to the customers via their website without visiting the branches. Online banks, on the other hand, operate primarily from mobile phones. You might never have to visit a bank or meet a banker in person, but with the help of your computer or mobile phone, you can access your account at any time and from anywhere.
While you may have online banking services on offer even from traditional banks, online banks have a more wholesome and complete approach to it.
Pros Of Online Banking with online banks
- Lower Fees:
Online banks have to worry less on maintenance and manpower. Since they don’t have to spend any money on their branches and offices, they tend to have much lower or no fees than traditional banks. Various online banks do not charge any monthly or service fees. Some banks also do not charge any overdraft fees from their customers.
Generally, traditional banks charge a monthly fee of around $10, which might be waived if there is a minimum balance of $1500 in your account. The average overdraft fees charged by large banks is around $35.
2. High-Interest Rates:
Online Banks offer a much higher interest rate, providing a higher percentage yield annually. The best online banks offer 1.50% APYs for their savings accounts, whereas the most extensive traditional banks offer 0.01% APY and the national average savings rate is 0.05%.
These differences might not seem relevant, but if you have a large balance of say $10,000 for a year, a 0.01% APY will fetch you only a dollar, whereas 1.50% APY will give you a little over $150.
Various brokerages and non-bank services offer financial products like online cash management accounts, which is an excellent option for earning interest. They produce good interest yields and provide features like saving, checking and investment accounts. That’s another advantage of online banks that you wouldn’t get elsewhere.
3. Standard banking services:
Any bank must have an extensive ATM network similar to MoneyPass and Allpoint. Despite having high rates of interest and lower fees, online banking also offers basic features that are offered to you by traditional banks, including an ATM facility.
How, you would ask? Aren’t online banks supposed to have only an online presence? Sure, they do – but they have teamed up with partner banks and other financial institutions to have ATM’s available for their customers.
Having fee-free ATMs across the nation will allow your customers to have easy access to cash at their convenient locations. Many online banks also refund the ATM fees if charged any.
Customers often fear online banks by considering their security policies to be risky. Similar to traditional banks, online banks also have security protocols to safeguard your money.
Before choosing an online bank, you must verify whether the bank is insured by the Federal Deposit Insurance Corp and has efficient fraud monitoring and encryption features. Precautions that can be taken by yourself are avoiding public Wi-Fi and having up-to-date antivirus software on your phone and laptops.
5. Easy Operations:
Accessing your bank account from any location is a great advantage to customers. Providing round the clock services, online banking clients can reach their customer services 24 hours a day and seven days a week.
Cons Of Online Banks
- No branches:
Customers will not be able to approach a bank if they require in-person help. Instead of physical meetings, online banking provides online chat or phone-based services for customers.
- Deposit Disadvantages:
Many of the online banks have complicated deposit processes for cash. To put money in your account, you may have to look for a deposit-accepting ATM or deposit money in a traditional bank account, then transfer it online to your desired account. Another option is to buy a money order with cash and then depositing it with the help of your online mobile app.
Some online banking partners up with third-party services to accept cash deposits with an additional service charge of around $5.
2. Limited services
Many of the online banks do not offer certificates of deposits or checking accounts. As a result, separate accounts have to be opened at separate institutions.
Are Online Banks A Good Option?
If you don’t prefer physical visits to your bank and are more interested in the higher percentage returns, then online banks are the right choice. One of the best advantages of an online bank is opening an account online without giving up your account in your local traditional bank.
Having an online and offline account enables you to receive the best interest and physical customer services whenever you need them.