Thinking Of Opening An Online Bank? Here Are The Pros And Cons
Online banks have radically changed the way we manage our money, and more and more individuals are converting to them every day. However, the thought of primarily banking online can be quite a change for those who are used to maintaining their savings in the bank down the road. Here are some advantages and disadvantages of online banks so you can decide if opening an account is the best option for you.
Open An Account With Ease
You can open an account with an online bank at any time. You don’t need to schedule a meeting with your banker in person at a nearby branch or wait until business hours. Nobody is going to stop you if you decide at 3 a.m. on Christmas morning that you want to create a bank account online.
A few bits of personal data, like your name, Social Security number, address, and birthdate are required. You might also need to deposit money straight away. Others, though, will let you open an account without funding it right away, provided that you do so within a few weeks.
Not As Many Fees
Customers pay account maintenance fees in order to cover these expenses. Since online banks don’t have physical locations, they are free from this problem and frequently impose minimal or no fees. With an online checking or savings account, a maintenance fee is almost never required.
Online banks have also eliminated a lot of other standard costs. Many don’t charge you to use an ATM owned by a different bank, and some will compensate you if the ATM owner does.
Increased APYs
Additionally, compared to their brick-and-mortar rivals, online banks are able to provide deposit accounts with more attractive annual percentage yields (APYs). This is yet another advantage of not needing to maintain an expensive branch network.
The top online savings accounts currently provide APYs of around 0.50%, whereas the average brick-and-mortar savings account may only offer you a 0.01% APY, which corresponds to a $1 gain each year if you have $10,000 in the bank. This means that on a $10,000 deposit, you would make around $50 a year.
While online banks have many benefits, you should be aware of a few disadvantages before opening an account.
Limited Options For Deposits And Withdrawals
The majority of online banks include debit cards, checks, and the ability to direct deposit and transfer money electronically. Access to cash is the main concern with online banks.
When a bank doesn’t have any physical branches, cash deposits can be difficult. Many online banks have at least a few ATMs that accept deposits, but if there isn’t one close by, you might be out of luck. Because of this, some people decide to keep at least a checking account at a physical bank so they can transfer money as needed.
Since the majority of banks have extensive, nationwide ATM networks, withdrawing cash is typically not too difficult. However, if there aren’t any nearby, you could have to pay a fee to use an out-of-network ATM. Additionally, if you simply have a savings account, accessing these assets might require a physical checking account.
No Branches & Little Customer Service
Although not everyone will miss going to their neighborhood bank, there are occasions when it’s nice to have the choice. You need to feel relatively at ease managing your money online in order to use an online bank effectively. You should avoid using digital banking if you don’t know your way around the internet or a smartphone.
The majority of customers concur that brick-and-mortar banks continue to provide superior customer care, particularly when speaking of smaller, regional banks where you can truly forge a personal bond with your banker. With an online bank, that won’t happen.
However, there are still options to contact live support if necessary. The majority offer phone service during business hours, and some also provide live chat or social media support. Since some people hardly ever communicate with their banker, that is OK for most people. But if having access to individualized assistance whenever you need it is crucial to you, a physical bank may be a better option.
Is An Online Bank The Right Fit?
Whether an online bank is the best choice for you is entirely up to you. You should have a good notion of which direction you’re going after reading about the advantages and disadvantages of online banks, but you shouldn’t feel pressured to choose between them.
If it makes you feel more comfortable, you could open an online savings account to take advantage of its higher APYs and leave everything else at your neighborhood bank. If you want easy access to your money, you could also move everything to an online bank while maintaining a checking account at a physical bank.