Online banking is on the rise, and here are some of the reasons why.
It’s fun to imagine what Alexander Hamilton would think of online banking. By all accounts, Hamilton was a forward-thinking man. When he was Secretary of the Treasury, Hamilton pushed for a national bank, a bold proposal at the time. Thanks to his perseverance, the first physical bank opened in the United States in 1791.
And American banks have operated the same way for almost 200 years. People would enter a building and conduct their banking business, aided by bank staff. By the 1980s, ATMs were widely available and customers could perform some of their banking activities without assistance from staff. In 2006, 80% of US banks offered online services.
And then came online-only banks, financial institutions with no physical presence.
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Four Reasons People Choose Online Banking
As the name suggests, customers access the services of these banks online. There are no cashiers, no drive-through transactions, no bowls of candy on the counter. Online banking – or internet banking – lets you manage your money from a computer or mobile device.
It’s no surprise that after more than 200 years of doing things the same way, the shift to online-only banking hasn’t happened at lightning speed. No less than 96 million Americans have remained loyal to their banks of origin. But for those who have made the switch, the reasons for doing so are many.
There’s nothing more convenient than being able to take care of all your banking needs while staying in your pajamas. If, like some of us, you sometimes wake up in the middle of the night and wonder if you’ve paid a bill or made a deposit, you can retrieve the information on your smartphone or computer. If you have a check to deposit, all you need is your online banking app on your phone to do so. All you have to do is take a photo of both sides of the endorsed check and click “submit”.
While most traditional banks also offer the convenience of online banking, online-only banks tend to devote more resources to this type of technology. After all, it is their equivalent of a branch.
Online-only banking allows you to keep tabs on all your accounts in one place, an especially great perk if you run a small business. Imagine being able to gather all your tax records in minutes.
2. Reduced fees
If you need to maintain a minimum balance in order to avoid fees from your current bank, you’ll likely find online banks more lenient. Most offer unconditional checking accounts, which do not charge additional fees for low balances.
Some online banks offer fee-free withdrawals from any ATM and will refund you even if the host ATM charges you. For example, let’s say you need to withdraw money from an ATM owned by another bank or a convenience store. If that bank or convenience store charges you a fee for the service, your bank will return the money to your account. Simply put, online banks help you avoid unnecessary fees.
3. Attractive interest rates
Online banks can offer higher interest rates on their deposit accounts because they have lower overhead costs than physical banks. If you’re someone who likes to maintain a high checking or savings account balance, it’s definitely worth exploring the great rates offered by the best online savings accounts.
4. Advanced Technology
Technology is the daily bread of an online bank, one of the things that sets it apart from the competition. For this reason, you can rely on an online bank only to have the latest comprehensive applications, encryption, and other enhancements that simplify your banking experience. Some online banks offer budgeting and saving tools to help you reach your financial goals, while others will help you track your credit score.
The best of both worlds
Online banks have a lot to offer, but nothing in this world is perfect. Here are two issues that may put you off: you can’t directly deposit cash, and some of them aren’t full-service. For example, some online banks offer brokerage accounts while others do not. Some sell insurance products, some don’t. Also, if you need services that are traditionally found in a brick-and-mortar bank – like notarization or safe deposit box rentals – you won’t be able to access them through an online-only bank.
However, there is a workaround. Keep some of your money in a local bank or credit union with free verification. If you have money that you want to transfer to your online banking account only, first deposit it into your local account, write yourself a check, then scan it into your online account as you would any other deposit.
Keeping an account at a physical financial institution and opening another at an online-only bank offers the best of both worlds. You have access to the personalized services you need at your local bank and can earn more interest on your online account.
Online banking is easy, fast, convenient and can earn you money. The only thing to do now is to choose an online account that suits your needs.
These savings accounts are FDIC insured and can earn you 8 times your bank
Many people miss out on guaranteed returns because their money languishes in a big bank savings account earning almost no interest. Ascent’s picks of the best online savings accounts can earn you more than 8 times the national savings account average rate.