Main Reasons to Use Online Banking: Online banks allow you to conduct transactions over the Internet using your computer or mobile device rather than in person. You may be wondering why so many people use them and how they differ from traditional banks if you’ve never used an online bank.
There are many similarities, but some key differences make online banks attractive to savvy Internet consumers. Using an online bank can help you to choose the right banking solution for your needs.
Free checking account
One of the main reasons to use online banking is the possibility of a free checking account, which is a checking account without the monthly maintenance fees that are usually imposed for having an account.
Some traditional banks and credit unions offer free checks, but these are generally smaller institutions. In general, it is difficult to find this deal in traditional banks without strings attached. In most cases, you must qualify for a free checking account at traditional institutions by depositing your paycheck into your account or maintaining a large account balance.
That’s not the case with most online banks, which offer free checking accounts to anyone, often without a minimum initial deposit or minimum balance requirement. Also, you may be able to earn interest on the cash in your checking account by using an online bank. The interest rate is generally not as high as the rate of an online savings account, but it is much higher than what you can normally get at a traditional bank.
Higher interest rates
Online banks are known to pay higher annualized interest rates (APY) on savings accounts and certificates of deposit (CDs). The reason is that online banks don’t have to pay overhead costs associated with building and maintaining a physical branch, so they can pay customers a little more.
If you are looking for the absolute highest interest rate available, you will probably do better at an online bank. Don’t be disappointed if you discover that another bank exceeds its rate. This is why some people open and use multiple bank accounts online and transfer money between accounts as rates change. This strategy can be rewarding, but it is important to pay attention to the transfer periods during which your money is not in any account earning interest.
If you know a computer, yet another reason to use online banking is that they generally lead the way in banking technology. Of course, some small banks and credit unions offer certain high-tech features even earlier than the larger online banks, but online banks generally offer new features before traditional banks do. One of those features, a mobile check deposit, is a great way to fund bank accounts online without having to send deposits through the mail (which means your money starts earning interest more quickly).
Online banks also allow you to get features that you would not otherwise have access to. If your bank doesn’t yet offer online bill pay or person-to-person payments, chances are good that you can find an online bank that does. You can also enjoy a larger ATM network, depending on where you live, making it easy to make withdrawals for free.
No trips to a branch
Ultimately, online bank accounts save your time of having to visit a branch during limited business hours. If you need help, most banks offer remote customer service, via email, chat, or toll-free phone. And, as the competition among banks increases the quality and availability of customer service.
Also, people who live in small communities can appreciate the anonymity that comes with an online bank; no one in the city will know about your financial transactions as they will not see you carry them out.
Should you use a traditional or online bank?
The above reasons to use online banking make them a convenient option for Internet-savvy customers looking for affordable accounts with high-interest rates and advanced features. Overall, they are a viable addition to the banking world. But they are not perfect or for everyone.
If you prefer to transact or get agent account guidance in person, you may want to stick with a traditional bank. The same is true if it gives you the peace of mind of knowing that you can physically access the bank that has your deposits.
If you choose to bank with an online institution, you should also be comfortable with using computers and a basic understanding of Internet security. Online banking is generally considered a safe way to transact if you choose a legitimate bank that offers insurance for your deposits from the Federal Deposit Insurance Corporation (FDIC). But you will need to keep your system up to date to avoid phishing scams, which you can fall victim to if a copycat website tricks you into providing your personal information or bank account details.
As with everything related to technology, from time to time you may experience technical problems. That said, for most people, the benefits of using an online bank outweigh the cons.