How Online Banking = More $$$, And It’s Easy, Too
Some of us think of online banking and break out in hives. Yet the process is so simple and affordable that it makes brick-and-mortars seem so last century.
Have you ever wondered what the deal was with those online banks that seem to pay better interest rates than every other bank in town?
Lucky for you, I can fill you in on all the details. I’ve been using an online-only bank for most of my banking needs since 2005.
Online-only banking is a financially beneficial relationship – both for myself and for the bank I use – but many people are still skeptical. I often get questions about how the banks work, what benefits they offer, and what limitations they may have.
Why Would Someone Use a Bank with No Branches?
Brick-and-mortar bank branches cost banks a lot of money. They have to pay a lot for the real estate, the maintenance, and the staff. Online-only banks have no branches, so they save a ton of money and pass the savings on to their customers.
Online banks generally have much higher interest rates and much lower fees than your standard brick and mortar bank.
Some even have pretty sweet perks like ATM fee rebates up to a certain limit. I made the move to online banks to earn more interest. Sadly, interest rates took a nosedive, so I didn’t earn as much extra interest as I had hoped.
But thankfully, I always have (and I still am) earning more interest than my local brick-and-mortar banks offer.
Are Online Banks Safe?
Banking with an online bank is just as safe as your brick-and-mortar bank. Both have data centers where your data is stored, so the risks of banking online and of banking locally are similar.
From a risk-of-loss standpoint, most online banks are insured by the Federal Deposit Insurance Corporation (FDIC), the same group that insures brick-and-mortar banks. Just double-check the website before depositing any funds.
What Happens If You Need to Talk to Someone?
You won’t be able to walk into a local branch to talk to someone, but that doesn’t mean you can’t talk to anyone. As with big banks, online banks have a telephone number you can call to get the assistance you need.
Due to the fact that these banks have no branches, their phone-based customer service is normally higher quality, in my opinion, than brick-and-mortar banks. In fact, my online bank has 24/7 customer service and a wait time listed on their website. At the time of writing this, the wait time was zero minutes.
How Do I Deposit Checks?
When I signed up for my first online bank, I did wonder about the challenge of getting a check deposited, since there were no branches. Most online banks allow you to virtually deposit checks either through scanning the check on your computer or taking snapshots of your check with your phone. The software is super easy to use, and it’s much faster than the old school method mailing checks to your bank.
There Are Some Downsides
Online banking does have a few downsides. For instance, you can’t deposit cash in an online bank.
It’d be sweet if you could take a picture of a $20 bill to put it in your bank account then go spend that same $20 bill at the store, but sadly it doesn’t work that way.
The lack of ability to deposit cash directly is frustrating because it means that you need to have an account at a local bank or credit union. You’ll have to deposit cash with your local bank then transfer it to your online bank.
Some people hate talking on the telephone or in online chat boxes when they have a problem. If you hate these options and would rather talk to someone face-to-face, an online bank probably isn’t for you.
Even if you’re having a major problem like identity theft, there isn’t someone you can visit in person to resolve the problem.
Online Banks Are Growing
I’m not the only one who has moved their money to an online bank. According to the Banks Ranked by Total Deposits report, online banks, such as Ally Bank, have been climbing up the list. If you want to earn more interest and pay less in fees, take a look at what online banks have to offer.
Top Five online banks by total deposits as of December 31, 2015
Ally Bank – $66,349,246,000
USAA Federal Savings Bank – $63,451,104,000
Capital One Bank (CapitalOne360.com) – $62,010,846,000
Discover Bank – $49,745,989,000
Synchrony Bank – $48,166,538,000
Ally Bank and USAA Bank offer free checks.