These days there
are more options to bank than there ever have been. There was once a time when
there were only a handful of banks and banking was still a chore. Now, it
doesn’t have to be like that. Stalwarts which have been at the top of the
banking game are now offering more and more services than ever.
However, in the
last few years, we’ve seen “Internet Banks,” often known as direct banks, become
very popular. They’ve become popular for good reason but, are they the best
option out there? There are good and bad points when it comes to eyeing up an
online bank to switch to. However, depending on what type of spender or saver
you are, direct banks could be the best thing to ever happen to your wallet.
Why Online Banks Are Good
Logistically,
direct banks can offer better interest rates and charge very few fees, if any.
They can do this because they don’t have branches like Bank of America does.
There’s no need to pay rent on brick-and-mortar bank branches because direct
banks just don’t have any. This leads to a streamlining of online services,
better offerings, and less hassle when it comes to fees.
One of the bigger
pros for online banks is that they often offer much better interest rates for
checking accounts. In some cases, it can be as high as 0.9%, like it is for the
GE Capital Bank. The norm, however, is still above the 0.1 - 0.3% you’ll find in
brick-and-mortar stores. Many direct banks offer 0.5% interest on
balances under $15,000. The more you check, the higher it goes.
Diversity. Online
banks can offer a much wider range of services than brick-and-mortar stores. As
you might expect from something born online, direct banks can target a niche
without having to justify themselves.
While most online banks function the way
you’re used to - minus the branches, of course - some can be very different.
Some online banks will offer perks on everything you do, like PerkStreet and
others. You can effectively choose a bank that fits with you, instead of having
to adapt to your bank.
Freedom is
another big pro for online banks. You’re free to do what you want with your
money and there are a great many ways you get a hold of your money. It’s
nowhere near as complicated to withdraw your cash as you think.
Where Online Banks Fail
Nothing in life is perfect and online banks are no different. If you’re somebody that likes to do things as you always have done, and you value peace of mind, then online banking might not be for you. Sure, being able to get access to your money from a web page is great but, for those moments when you need to explain something to somebody face-to-face, brick-and-mortar branches might be the better way to go.
Some ATMs will
charge you for taking out cash. While many online banks are able to withdraw
cash free of charge at thousands of ATMs across the country, some ATMs will
still charge you. In a lot of cases, whoever owns or runs the ATM decides who
they want to be able to use their ATM free of charge.
It’s very much worth
looking into your online bank before you pull the trigger – remember, a single
service fee can completely wipe out the benefits of the high-interest rate.
Don’t fall into the rat trap of losing your interest to service fees!
Fees can be
higher than you think. Online banks don’t need to charge as much as the Bank of
America of the world does, they still need to make a profit. There’s a vast
difference in how much each direct bank will charge you for a stop payment and
so on.
A lot of them will charge you for inactivity, often to the tune of $5 a
month. This is another thing you should consider before taking your money
digitally.
In summary, the rise of online banks has significantly altered the landscape of banking, offering consumers a wide array of benefits such as higher interest rates, lower fees, and greater flexibility. These digital institutions have streamlined services, providing customers with convenient access to their accounts without the need for physical branches.
However, while online banks offer numerous advantages, they may not be suitable for everyone. Some individuals may prefer the traditional approach of banking with brick-and-mortar institutions, valuing the assurance of face-to-face interactions and the familiarity of in-person transactions.
Moreover, potential drawbacks of online banking include ATM fees, service charges, and the possibility of higher-than-expected fees for certain transactions. It's crucial for consumers to thoroughly research and understand the terms and conditions of online banking services before making the switch to ensure that the benefits outweigh any potential drawbacks.
Ultimately, the decision to bank online or with a traditional institution depends on individual preferences, financial needs, and comfort levels with digital banking platforms. As technology continues to evolve, consumers have more options than ever before, empowering them to choose the banking solution that best aligns with their lifestyle and financial goals.
