When most think of banking, they imagine standing in line or waiting behind other cars waiting their turn to make deposits or withdraw cash. The first sign of automation was the ATM, but we have come a long way from the ATM in banking convenience. Now you can use a computer or an app on your smart device.
Though most traditional banks offer similar options to online banking institutions, there are some reasons that you should heavily consider online banking. These banks are purely online with no brick and mortar option, which can be difficult if you have to make a cash deposit. However, most people don’t deal with cash, and those who do regularly may not want to use online banking options. Here are four reasons online banking beats traditional banking.
Convenience
The best thing about online banking is the convenience it offers instead of driving to a bank and waiting in line to complete a transaction. While both traditional banks and online banking institutions both offer similar services for convenience regarding online banking as opposed to traditional banking, there are some significant differences. However, the ability to do banking anytime instead of just during bankers’ hours, e-deposits of paper checks, and the ease of transfers between accounts are some of the conveniences both extend to their customers.
Lower Fees
Due to online banks not having a high overhead like traditional brick and mortar banks, they can reduce or even get rid of fees. Traditional banks have to pay staff and keep up with building maintenance and pay bills related to the building, while online banks have less of these expenses. Most online banks have no to low overdraft fees and generally don’t have any minimum balance fees. Many online banks also offer free withdrawals from ATMs and often refund fees charged by the ATM operator.
Online banks are attracting new clients with lower fees than traditional banks who rely on fees as part of their revenues.
Higher Interest Returns
While almost every bank offers savings accounts that earn interest, online banks generally offer significantly higher rates for the same justification. They can offer low to zero fees and low operating expenses. While savings accounts are certainly not going to be a get wealthy fast alternative no matter the banking institution, the variations in the traditional bank interest rate and the online bank interest rate will add up to a significant difference in the long-term.
Traditional banks normally offer 0.01% annual percentage rates (APR), while online banks offer between 0.05 and 1.5% annual percentage rates (APR). This adds up to more substantial savings, and if you are looking for a zero-risk way to increase your savings, online banks will give you the most money back.
Technology
Technology and innovation will again not be exclusive to online banks over traditional banks. However, the fact that a virtual bank is 100% built on technology will be on the cutting-edge of innovation in the banking industry. Their main focus is online and mobile device interface with banking. This technology means that online banking customers will continue to get the latest features and services possible and control their bank account.
The Drawbacks
There are two downsides to having an online bank account. As mentioned before, there is no capability to deposit cash, and online banks don’t have other services special to the traditional banking institutions. These services include notary services, loan negotiations, safe deposit boxes, and other services requiring in-person communication. Also, online banks often don’t offer CDs, brokerage accounts, or insurance products, which most traditional banks offer, although some online banks offer those products and services.
These downsides can be conquered in a few ways. You can still keep a traditional bank checking account free to use for cash deposits or open a safe deposit box. Other institutions will offer other services you may need, or you can search to find an online bank that has the services you need since some do offer brokerage accounts and insurance products.
Conclusion
Online banking has some distinctive benefits regarding the savings on fees and the higher interest savings accounts. These reasons speak strongly about choosing online banking for your primary banking needs. Though there are drawbacks, those can be overcome though you may prefer to continue to use your traditional brick and mortar bank.
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