More people and businesses are going the way of the technological money management via online banking. The effortlessness of opening online bank accounts, managing multiple accounts over the internet along with the convenience of not having to step outside the home to perform these mundane bank errands have prompted more Americans to welcome the best bank rates.
While there are many advantages to banking online, this route may not be suited for everyone. Understanding the pros and cons of the best online banks can help you determine whether opening a deposit account — whether a savings account or even a debit account — is a wise move to make.
Unlike traditional brick-and-mortar financial institutions, the very nature of online banking has given online banks the ability to remain competitive in terms of the advantages they offer their customers.
Higher Deposit Rates: Compared to many commercial banks that disappoint their customers with practically a zero percent return rate on deposited funds, the best online banks provide depositors with the benefit of high-yield deposit rates, at times, even in excess of ten times more than the average national rate.
Easy Fund Transfers: Instead of having to wait in line at a branch to transfer funds from your checking account to your savings account, online banking enable customers to conduct these transfers electronically with a few clicks of a mouse.
Additional Cash Back Rewards: The success of online savings accounts have led to a rise in online debit accounts, such as PerkStreet that give customers cash back for every eligible purchase that is made using the account. In addition to cash back, some of the best online banks also offer rewards like music downloads and gift cards to their users.
Fewer Bank Fees: Since online banks save money by not maintaining multiple branches, they are able to pass on the savings to their members in the form of fewer bank fees. While there may be charges for overdraft incidents, online banking customers typically spend less on this expense.
24/7 Customer Service: Years ago, customers would have to wake up bright and early on a Saturday morning just to speak to a bank representative about their accounts. But this is an inconvenience of the past. The best online banks often provide customer service all day and all week either over the phone or online.
If that isn’t enough, customers of online banking usually enjoy the security of knowing that their funds are federally-backed by the FDIC in the unlikely event that the financial institution fails. This guarantee amounts to the same $250,000 threshold as national banks.
There are important considerations to make if you’re thinking about transitioning to online banking.
Since online banks do not have physical branch locations available to its customers, those who need immediate access to their money in the form of hard cash may find online banking challenging. The most common way to withdraw money from an online savings account, as a result, is to electronically transfer the funds to a third-party checking account, then withdraw the funds at the institution’s branch. This, however, can take multiple business days and present an issue when time is of the essence.
Again, online banking relies on electronic transfers of funds from one account to another, or via direct deposit. A common issue that customers come across is that it can be difficult to deposit birthday cash and checks into online banks. Some institutions don’t accept cash or check deposits, while others accept these forms of money via mail. The latter poses a great risk for depositors, especially if the deposit is lost or intercepted en route to the bank.