There’s no doubt having an online checking account has many advantages over an account at a physical bank. You can manage your account using a computer or a smartphone. You can check your balance, pay bills, and transfer money from one account to another and never have to step into an actual bank. Using a smartphone app, you can easily deposit a check into your account by simply taking a picture of both sides of the check. Also, many online banks have a contract with ATM providers so customers can use their machines to make deposits in cash.
Online checking gives you advantages over going to a physical bank. That said, consumers must be aware of some disadvantages that come with the turf.
You can open an account, check your activities, transfer money, pay bills and never go to a physical bank.
You might miss out on speaking with a teller one-on-one. Online banking also means you must be on top of what’s going on with your account and always protect your login information and never give this information to anyone.
Online Accounts Offer Lower Fees & Higher Yields
Because online banks have less overhead, the amount is passed on to the clients in the form of lower fees and higher yields. As of December 2021, the average percentage yield (APY) for checking accounts was 0.03%, according to the FDIC or Federal Deposit Insurance Corporation. Online banks often offer checking accounts with an APY of 1% or higher. Another advantage of online checking is its low fees as a result of overhead savings being passed on to the client. In general, online banks do not have dedicated ATMs, so reimbursements are passed on to their clients for charges they incurred making out-of-network withdrawals.
You Can Take Advantage of High-Tech Features
Most online bank accounts offer high-tech features such as budgeting assistance and compatibility with personal finance software, including Quicken and Microsoft Money. Many accounts will let you set up automatic weekly or monthly transfers of a given amount of money to move from one account to another. This service will help you stay on a monthly budget or increase your savings. Another great feature is finance software which helps with budgeting and makes filing your taxes so much easier.
The Downside of Online Checking Accounts
Before jumping on board with an online checking account, there are a few downside issues to consider. You will not have a personal banker from your local branch to help you deal with problems that might arise in your account. You will have a call center representative from a toll-free customer service number to assist you. Most banks offer 24-hour customer service by phone, while some limit customer service to normal business hours. That said, you can still go to your bank’s branch, and someone can pull up your account and help you out.
Another concern to take into consideration is online security. There are very few things that people are more protective of than their banking information. Practically nothing else can be more frightening than your account falling into the hands of a complete stranger who has bad intentions and is up to no good.
Although most online banks offer encryption software and high-tech site security, cybercriminals can use malware to infect online banking customers’ browsers and steal their login and password information. It’s important to keep your computer and mobile devices free of malware and viruses to maintain your online checking account.
Are Online Accounts Protected by FDIC?
From the FDIC – The FDIC offers insurance for funds that you deposit in FDIC-insured banks. If your FDIC-issued bank fails, the FDIC will protect you against the loss of your insured deposits, whether the bank is brick and mortar or online-only.
Do Traditional or Online Banks Have Better Interest Rates?
Because online banks pay less overhead than your physical bank, most will pass the savings on to their clients as lower fees or higher yields. Most banks offer approximately 0.03% in interest. Online banks can offer checking accounts with an APY of 1% or higher.
The Disadvantages of Online Checking Accounts
You will not have the advantage of meeting up with a teller or bank manager one-on-one. As the holder of an online checking account, you must stay on top of everything going on with your account and protect your login information and never fall prey to online scams.
Deciding on an online checking account over a physical bank branch has its ups and downs. The upside, you will have higher yields, lower fees, and a lot of high-tech features to help you with account maintenance and budgeting. The downside, it’s more difficult to have access to actual customer service as well as online security. The bottom line, this is a decision you must make on your own to decide which will work best for you.