Online banking: What is it?
Online banking is the use of a computer or mobile device to manage your financial accounts. This covers money transfers, check deposits, and electronic bill payments.
Customers can often access their accounts online at traditional banks and credit unions that have physical locations. However, mobile access is mostly provided through online banks and providers. You won’t actually interact with a banker, but you can access your account whenever you want using a computer or mobile device. Let’s examine online banking in more detail.
advantages of online banks
Online banks typically have little or no costs because they don’t have to pay for branch upkeep. For instance, many online accounts don’t charge monthly service costs, and others don’t even charge overdraft fees.
For comparison, large brick-and-mortar banks frequently impose a $10 monthly service charge on accounts, but they might remove it if you fulfil certain criteria, like maintaining a $1,500 minimum daily amount. A 2019 NerdWallet survey also found that large banks charge an average overdraft fee of $35.
better rates of interest
Deposit accounts typically provide greater annual percentage yields at internet banks. For instance, the best online savings accounts offer APYs of about 0.45%. Compare that to the 0.24% national average savings rate and the 0.01% annual percentage yield on savings accounts offered by some of the biggest brick-and-mortar institutions.
A difference of a few percentage points might not seem like much, but the bigger your balance, the more important it is. At 0.01% interest, a balance of $10,000 deposited for a year would earn $1; at 0.45%, it would earn slightly over $45.
Another way to earn interest is through online cash management accounts. Brokerages and other nonbank service providers supply these financial goods. They frequently incorporate the benefits of checking, savings, and investment accounts and can also offer competitive yields.
regular banking services
Although most online banks have lower costs and greater rates than traditional banks, many nonetheless offer the same standard financial services, such as:
access to ATMs A reputable online bank will be a part of a network with thousands of fee-free ATMs across the country, such as Allpoint or MoneyPass. Some online banks will also cover any costs the ATM owner charges if you need to withdraw money from a non-network machine.
Security. Online banks are just as secure as traditional banks when basic security precautions are used. Before opening a bank account, check for features like encryption and fraud monitoring and confirm that the funds are covered by the Federal Deposit Insurance Corp. You can also take precautions to ensure secure online banking, such as avoiding public Wi-Fi networks and maintaining up-to-date antivirus software.
Accessibility. On your computer or mobile device, you can access your bank accounts and bank services whenever there is an internet connection. Additionally, you can call customer assistance, sometimes 24 hours a day, 7 days a week.
Online banks’ drawbacks
Be prepared for limited access to in-person assistance while using an online bank. Many banks offer telephone-based customer service as an alternative to in-person interactions. Some banks also provide support through online chat and social media.
Cash deposits might be challenging.
Cash deposits into online banks are frequently laborious operations. You might need to locate an ATM that takes deposits. Alternatively, you might need to deposit funds into a regular bank account and then transfer them to your online account. A money order can also be purchased with cash and then electronically deposited using the mobile app for your online bank.
To enable shops and convenience stores to accept cash deposits, some providers additionally collaborate with a third-party service, like Green Dot. However, these providers often charge deposits of roughly $5.
less alternatives in one location
You might need to open one form of account at one institution and a different sort of account at another because some internet banks offer outstanding savings accounts but don’t offer checking or certificates of deposit.