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As financial technology advanced, traditional banks began to explore the possibility of offering services online. There’s no doubt that online banking can be convenient – every time you turn on your computer or smartphone, your bank is waiting for you – but there are other pros and cons as well.
Here’s an overview of some things to consider when choosing between online and traditional banking.
Benefits of online banking
Some benefits of online banking go hand-in-hand with just being online. others are competitive advantages provided by online banks by taking advantage of their cost structure. The main advantages offered by online banking services include:
- 24/7 account and service access
- Speed and efficiency
- Online bill payment
- Low overhead can mean low fees
- Low overhead can mean high interest rates on deposit accounts
Here is an overview of these advantages one by one.
Related: Many Americans Don’t Understand the Basics of Banking
24/7 account and service access
Online banks are available 24/7, as long as you have an internet connection. Some online banks, like Ally Bank, go a step further by giving you 24/7 phone access to an actual customer service agent. This can be extremely useful if you don’t have internet access or think you need the help of a human brain rather than a computer algorithm.
Read more: History of online banking — How Internet banking became mainstream
Speed and efficiency
If you need to transfer money, apply for a new loan, or perform almost any banking transaction, you will usually have to wait in line at a physical banking establishment. With an online bank, there is never a wait. As long as you can log in, you can access your accounts, apply for a new credit card, or perform almost any banking transaction you want without going to a bank or waiting in line.
Online bill payment
One of the great advantages of online banking is online bill payment. Rather than having to write checks or fill out forms to pay bills, once you’ve set up your accounts in your online bank, it’s just a click away – or even less, as you can usually automate paying your bills. With online bill payment, it’s easy to manage your accounts from one central source and track incoming and outgoing payments to your account.
Low overhead can mean low fees
Online banks don’t have to pay for electricity, janitorial services, landscaping, or rent, so they can pass those savings on to customers. Generally, this means that online banks can charge less fees than traditional banks. For example, most online banks offer a free online checking account with no deposit, as well as other no-fee bank accounts, such as IRAs. There are a number of online banks with free verification and no minimum balance; If you’re worried about applying for an account with bad credit, you may be able to open an online banking account for free, with no credit check required, although there may be ongoing fees.
Related: 10 Banks That Don’t Use Chex Systems
Low overhead can drive high rates
In addition to offering low fees, online banks often offer the best interest rates, whether you’re looking for a certificate of deposit, a high-yield checking account, or high-interest deposit accounts like a money market account. Although rates fluctuate, if you look at a current list of the best CD rates or the best free online checking account rates, you will generally find that the banks that pay the best interest rates are the online banks.
See This Online Bank With High Yield Checks: Suction Bank Review
Disadvantages of online banking
No type of bank can be the best at everything. Despite their many advantages, there are also some disadvantages to using online banks. Here are some of the disadvantages of working with an online bank:
- Technology issues
- Security issues
- Ineffective in complex transactions
- No relationship with a personal banker
- Not convenient for making deposits
Read on to learn more about these downsides.
Technology issues
In many ways, an online bank is only as good as your – or their – internet connection. If there is a power outage or the servers go down, you may not have any access to your account. While some banks offer a customer service phone number, it can be overwhelmed if online access is down. With a real bank, you can always find someone to talk to at the branch.
Security issues
Although many online banks are reputable and well-established, it can sometimes be difficult to feel comfortable with a bank that does not have a physical presence, especially when large sums of money are involved. If a website suddenly folds, what will happen to your money? There is also a risk of identity theft – or actual theft – if someone gains unauthorized access to your account through a hacked or stolen password or login credentials.
Ineffective in complex transactions
Online banks may be able to transfer money between accounts or pay bills, but you might be more comfortable with an international brick-and-mortar bank if you have complex transactions. Around the world, business-focused banks like Chase have global transaction capabilities, such as the ability to send payments in over 35 different currencies around the world, that online banks might not be able to. gather. Without a real-world presence, most online banks can’t even offer the services of a notary, which requires an in-person visit and is necessary for the most important financial transactions like buying a house.
Related: How to Open a Bank Account Online
No relationship with Personal Banker
Over time, you can develop a relationship with a personal banker if you visit a traditional brick-and-mortar location. If you’re dealing with an online bank, on the other hand, you’re usually handed over to an anonymous customer service agent who probably won’t know you from the next customer. If you are in real trouble, financially speaking, having a relationship with someone who can help you and who knows you well can be a major advantage over a strictly online banking relationship.
Not convenient for making deposits
It may seem counterintuitive that a bank, whose purpose is to attract assets, makes it difficult for customers to make deposits, but this may be true in the case of some online banks. With an online bank, you cannot simply deposit cash or a check at a local branch. In fact, some online banks, like Ally Bank, don’t accept cash deposits at all. Using Ally Bank as an example, to make a deposit you will need to send a check, transfer money from another bank or account, or use the bank’s electronic check deposit service.
Next step : Online Banks vs. Traditional Banks – Where to Get the Best Interest Rates
Editorial Note: This content is neither supplied nor commissioned by the banking advertiser. The opinions expressed herein are those of the author alone, not those of the Bank Advertiser, and have not been reviewed, endorsed or otherwise endorsed by the Bank Advertiser. This site can be remunerated via the affiliate program of bank advertisers.
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