Pros of Online Banking

March 6, 2012
Sandra Parker is a staff writer at PT Money: Personal Finance.

PTMoney

Do you use an online-only bank? After working for years at a large, national brick and mortar bank, I have begun seeing more and more banks emerge that are strictly online. I started asking myself what my criteria were when it came to determining where to put my money. Are there benefits to being a member of an online-only bank? Are there drawbacks? Is my money safer in a brick and mortar establishment? I did a little research and found out that there was quite a bit I didn’t understand about online-only banks. Pros of Online Banking

Low fees: It's not fun having to pay my bank a monthly fee for the privilege of owning an account, a fee to use the ATM, a fee to get a cashier’s check, and another fee for the privilege of using my debit card. Online-only banks don’t have as much overhead since they don’t have to pay rent on hundreds of branches and the payroll of thousands of employees. They can charge me less (much less) for the services they provide.

Higher interest rates: Online-only banks typically pay a higher interest rate on your savings and interest bearing checking accounts thanks to point number two: lower overhead costs. This, in addition to lower account maintenance costs, makes my dollars go farther.

Same protections: Regardless of where you bank, look for the FDIC symbol. Most (if not all) online banking institutions that I’ve seen have FDIC insurance, just like brick and mortar banks. Cons of Online Banking Of course, not all that glitters is gold. There are a few drawbacks to using an online only bank.

Cash transactions are tough: In a world where direct deposits, online bill pay and wire transfers are king, there are times where cash transactions do happen. Trying to deposit physical dollar bills into an online only bank is hard. I would suggest that individuals and businesses who operate primarily with cash stick with a traditional brick and mortar establishment.

Getting a cashier’s check is expensive: Where I bank, I can walk in a get a cashier’s check for just about any reason and pay very little for the service. Doing this with an online bank is not only more expensive, you won’t be able to get your check immediately…you’ll have to wait for it to show up in the mail.

There’s no personal interaction: I love the fact that when I walk into my bank, the tellers know me by name, they know what I want to do, and they are always happy to see me. You just can’t get that same personal attention from your computer screen. This isn’t to say that online only banks aren’t friendly and personal. Many have excellent customer service by phone.

Value-added services are missing: Okay, so the primary reason I go to the bank is to attend to my finances, but there have been several times that I have gone to my bank to have something notarized. This, and other similar services, are something that simply won’t happen with an online bank.

So, how do I choose what banking institution I use? I determine what services and attributes are important to me and go with the institution that can offer me the best deal on what I want. If low fees, efficiency and flexibility are important to you, while personal attention isn’t, an online only bank may be the bank for you. If you feel more comfortable with a more traditional banking solution, then it’s best to stick with a brick and mortar bank. If, however, you are like me, you take advantage of the best of both worlds and have an account at each.

Check out PT Money: Personal Finance for ways to make extra money, save more money, and spend money wisely. Also, see their list of the best free online checking accounts.

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