Most people opt for convenience and use electronic transactions for banking. In addition, many opt to avoid brick-and-mortar banks and choose to use their online banking tools even with traditional banks. If you consider online banking, here are seven things to consider before giving up a traditional bank.
Higher Interest Gains
Because online banking institutions have a lower overhead to operate, they can benefit their users. One way they offer this advantage is through interest rates. Not only do they offer interest on balances on both checking and savings accounts, but the interest rates are higher than those carried on traditional bank accounts and only on savings accounts.
Most brick and mortar banks offer rates ranging from 0.10% to 0.50%. However, on average, looking at online checking and savings accounts, they offer higher rates of 0.9% to 1%. Though this difference is slight, it does add up big when you consider it is offered on both checking and savings accounts.
No Fees
For the same reasons, online banks can offer higher interest rates to offer lower to zero fees. Again, online banks are looking to attract your business, so their low overhead helps them use the savings to benefit (and attract) customers.
Online banks will also often cover ATM fees, regardless of where in the world you make withdrawals. However, double-check the coverage of ATM fees as some banks will only offer coverage on a certain amount of transactions per a specific period.
Convenience
Unlike brick-and-mortar banks, online banks are open 24/7; however, most traditional banks offer electronic banking options similar to online banking, making some transactions similar other than the possibility of fees.
Your bank is also available anywhere you have the internet or phone service using mobile apps, which means you can do banking transactions from anywhere in the world. The convenience and 24/7 access could be the most significant reason online banking is the way to go for someone on the move or at odd hours to do their banking.
Security
Many believe that banking online is less safe than in-person banking at a brick-and-mortar bank. However, online banks have a high security and site encryption level, ensuring that all online transactions are secure. Though this is the case, you should choose an online bank covered by FDIC like a brick and mortar. This will give the assurance that your money up to $250,000 is protected against any theft or fraud online.
No Cash Deposit
While online banks and even current traditional brick-and-mortar banks offer e-deposits for checks and direct deposits for paychecks, they are different: cash deposits. So if you are given cash that needs to be deposited, you will not be able to do that with an online bank at all.
The only choice you will have is to take the cash and purchase a money card to use it online, which will cost a fee. Or you can use the money to make purchases, which could be inconvenient if you are making online payments or purchases.
No Personalized Service
Some people, especially older bank customers, like the personal touch given when they do their banking in person at a traditional bank. At the same time, this is understandable and could be considered a con by some. But, generally, the convenience and low to no fees make up for this impersonal approach to banking.
Technological Issues
If you are not used to banking in the virtual environment, adjusting can take some time. Online banking website designers try to make navigation as easy as possible for their customers, but some customers may never get used to online banking. This could be compounded if your online banking institution changes the site or upgrades that change the features you are used to using.
Conclusion
There are definite pros and cons to online banking. Once you have considered all the options, you may opt to ditch traditional banking institutions and move to online banking. Use the information you learned here to decide if online banking is right for you.
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