Using an online bank provides a way for an individual to manage their account from a cell phone or computer and can offer a much higher interest rate than a traditional banking account. While this perk may seem exciting, there are pros and cons to banking online, especially if a person uses an online-only bank.
Using an online-only bank
Most traditional banks that have a brick-and-mortar presence will allow their customers to bank online as well. However, some new banks are entering the market that don’t have physical branches. They only offer online-only banking options. This feature often allows them to offer better interest rates and lower fees since they don’t have to manage a physical establishment.
Consumers are happy
Most consumers are happy with the move to online banking, regardless of the type of bank that’s used. Statistics indicate that over 40 percent of banking transactions are now occurring online. When that statistic is broken down, it shows that 30 percent of online transactions are performed from a person’s mobile phone.
Online bank applications
If a person is thinking about opening an online-only bank account, they may find that the process is slow. Typically, they will complete an online application and may have to send the institution a signed paper document. This process is slow when compared to a person who signs up for a traditional bank account that has online banking. This type of application can be processed on the same day in most cases.
Direct deposits and cashier’s checks
If you choose to use an online bank and you don’t have direct deposit, you may be able to deposit your paycheck remotely via a mobile device or computer. However, there may be a limit on the deposit amount for checks that are deposited with a mobile device. Clearly, having direct deposit is beneficial with this type of account. An online-only account won’t be able to provide a cashier’s check. Instead, they’ll usually offer a wire transfer option.
Spending money and customer service
In the past, it was difficult to spend money when a person signed up for an online-only bank account due to the lack of an ATM network. While things are improving, it’s best if a person uses an online-only account that offers debit cards that are part of a large ATM network. There’s also less customer service with an online-only bank. A person will have to dial a toll-free number to speak with anyone. Traditional banks still offer personal customer support at their physical branches.