When most people think of banking, they think of waiting behind other cars for their turn to stuff their deposit into a tube and having it sucked into the drive-thru bank teller or standing in long lines waiting to hear “next in line.” And that way of banking will likely always exist. As automation and innovation have progressed, starting with ATMs in the 80s and moving to online banking options offered by central banks in the early 2000s, banking’s face has changed. You can automatically deposit your paychecks and use payment platforms to receive funds to be transferred into your bank without ever having to step foot into your bank or sit waiting for your turn at the pneumatic tube.
Now, some banks fly in the face of traditional brick and mortar banks. These banks are entirely contained online and are taking the banking industry by storm. Here are four reasons you should consider online banking.
Lower Fees
Because online banks don’t have the high overhead of traditional brick and mortar banks, they can minimize fees. Traditional banks have building maintenance and staff, while online banks have less of these costs. Most online banks have no minimum balance fees, and their overdraft fees are generally significantly lower than traditional banks charge. Also, many online banks offer free ATM withdrawals and reimburse fees charged by the ATM company.
Online banks are enticing new customers with lower to no fees than traditional banks who rely on fees as part of their profits.
Higher Interest Returns
While every bank offers savings accounts that gain interest, online banks can offer higher rates because they can offer lower to no fees, low overhead. While savings accounts are never going to be a get-rich-quick option no matter the banking institution, the differences in the traditional bank interest rate and the online bank interest rate will add up to a large difference in the long-term.
Traditional banks generally offer 0.01% annual percentage yield, while online banks offer between 0.05 and 1.5% annual percentage yields. This adds up to more significant savings, and if you are looking for a no-risk way to grow your savings, online banks will give you the most bang for your buck.
Convenience
The best thing about online banking is convenience. While both traditional brick and mortar banks and online banks both offer the same conveniences when it comes to online banking, there are some differences. Being able to do banking anytime instead of just bank hours, electronic deposits of paper checks, and ease of transfers are a few of the conveniences both offer.
Technology
Technology will again not be exclusive to online banks. However, the fact that an online bank is 100% based on the technology will be on the cutting-edge of innovation when it comes to banking. Their only focus is online and mobile device interaction with banking. This innovation means that online banking customers will continue to get the best services possible with a lot more control over their accounts.
The Drawbacks
There are two drawbacks to having an online bank account. There is no ability to deposit cash, and online banks don’t have other services exclusive to the traditional brick and mortar bank. These services include safe deposit boxes, notary services, and other services that require in-person interaction. Also, online banks often don’t offer brokerage accounts, CDs, and insurance products most traditional banks offer though some do.
These drawbacks can be overcome in a few ways. You can still keep a checking account free to use for cash deposits at a traditional bank or open a safe deposit box only if you need one. There are other institutions to get the 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 distinct advantages for savings on fees and 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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