While traditional banks allow you to complete some banking transactions online, some banks offer a purely online experience, without any physical steps and for visits.
While you may have concerns about customer service or security, most consumers are quite satisfied with their online banking experience. Many Internet-only banks pay higher interest rates on savings. According to the American Bankers Association, 73% of Americans prefer to bank online, with 36% of those who reach their cell phones (instead of a computer). ATM transactions now account for only 6% of total banking transactions.
Some issues that still exist with online-only banks, however, and the following can help you weigh the pros and cons of online banking.
Benefits of Online Banking
There are several reasons why online banking is so popular.
Easy account opening
Opening an online bank account usually only takes a few minutes. You can complete most or all of the steps online or with a short phone call.
Get Your Money Easily
Some online banks allow you to get your income funds a few days early. Those banks essentially allow you to spend your money before it has even arrived in your account.
Easy to spend from your account
While you may be concerned about accessing funds with an online account, you still have easy access as long as you use accounts that offer online bill pay or debit cards. You can use a card at an ATM, an online merchant, or in the face of a merchant. If you get cash often, it’s also helpful to choose an online bank that has an extensive ATM network or reimburses you for any ATM fees you pay.
Disadvantages of Internet Banks
Online Banking Customer Service
With a regular bank, you might have some familiarity with the staff, and with a small credit union, the staff might even know you well.
If you are the type of person who likes face-to-face interaction, you might find it easier to find it at a banking institution.
Sometimes problems are easier to solve in person. If there’s been a mistake with your account, a face-to-face conversation may be the most effective way to make progress when things are confusing. You don’t have to wait on the line and deal with the “escalation” process when everyone can sit down together and sort out the situation.
The bank branch staff matters because it’s easier to get quality service if you know them, they know you, and they know what you usually do with your accounts. You can choose who you deal with if you know the staff (ideally, if there is someone you like working with).
However, online banks often require you to call. They might answer the phone and help you, but they might not. You can always hang up and try again later, hoping to reach a more qualified (or more service-oriented) representative, but it’s frustrating and time-consuming. Fortunately, online banking customer service is often top notch.
Technical glitches
Online bank websites sometimes malfunction. When this happens, you don’t have a backup branch to go to, and the customer service phone lines are likely jammed. To protect yourself, always keep a reserve account open with some emergency cash so you’re not left penniless while the malfunctions are fixed.
Paying bills
You can pay bills through online bill pay, but sometimes you need other forms of payment. If you need to pay someone with a cashier’s check, an online bank account can slow down the process by requiring you to order a check and wait for it to arrive in the mail.
Depositing cash
When there are no locations in the country, dealing with cash can be problematic. Some banks allow you to deposit funds at an ATM or retail outlet, so explore these options if you often get paid in cash.
Great need for due diligence
With traditional banks, you know the bank actually exists, has branches and employees, and is authorized to operate. With online banks, you may have to do your own research to make sure they are authorized and registered with the appropriate regulators, have adequate capital, and meet customer satisfaction.
Withdrawal
If you just can’t tolerate any of the situations above, you will probably benefit from opening an online account. There are several reasons to consider online banks:
- They offer an easy way to bank for free. They are your best bet for securing high interest rates. They offer the convenience of a variety of ways
- You may never go into any of the problems mentioned above, and your overall experience will probably be satisfying, but you should always be prepared for the occasional glitch.