The biggest pros and cons of online banking

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There are many good reasons to opt for online banking, but there are also disadvantages.

Key points

  • Online banks often have lower fees than traditional banks.
  • They can also allow higher mobile deposits.
  • There are still some downsides, including difficulties in depositing money.

Today, when opening a bank account, you don’t need to stick with a bank located in your area, or even choose a financial institution with a physical location. In fact, there are a large number of big online banks that are keen on your business.

Not only has the world of online banking offered consumers a wider range of choices, many online banks are actually better than their counterparts with physical branches. They don’t necessarily fit everyone, however, as there are pros and cons to consider with this type of financial institution.

The biggest advantages of online banking

The main advantages of online banking are:

  • Many online banks offer lower fees: It’s common to incur account maintenance fees, ATM fees, overdraft fees and a host of other fees when you have a local bank. But online banks have eliminated many of these additional costs, making it cheaper to be a customer. Of course, you’ll want to shop around and read the fine print of any online bank you’re considering to make sure it’s truly eliminated the costs you’re trying to avoid.
  • You can often make larger mobile deposits: Online banks generally allow you to deposit much larger checks via your phone or tablet than local banks. If you hate having to go to a branch to make a deposit and often get big checks, that alone might be worth switching.
  • You may be offered a better interest rate: High yield online savings accounts often pay some of the highest interest rates of any financial institution. Surprisingly, it is also common for online banks to offer to pay interest on checking account balances. Although some local banks also do this, online financial institutions may be more likely to offer this incentive, and the interest rates they offer are usually higher than those offered by their physical counterparts.
  • Your bank (and cash) may be more accessible depending on your schedule: Online banks don’t offer in-person customer service, but many aim to compensate by making help available via phone and online chat 24/7. Many also have an extensive network of ATM partners or will cover ATM usage fees so you can get your money more easily without having to search for your specific bank branch’s ATM to avoid additional costs.

The main disadvantages of online banking

On the other hand, here are the main disadvantages of online banking:

  • It can be difficult to deposit money: Depositing cash can be nearly impossible with some online banks, as there is no physical location to withdraw the money. You may need to deposit the money at a local bank branch and transfer it wirelessly, or you may need to incur additional fees for a money order or deposit in person with a partner.
  • You will not have a physical branch to visit: If you need to speak with someone face-to-face to get financial help with your account, that won’t be possible with an online bank.
  • Many online banks offer more limited account options: Many online banks only offer limited services, such as checking accounts and savings accounts. If you want to have several different financial products, such as a bank account, mortgage, and credit card with one institution, a larger local bank may be your best bet.

Ultimately, you’ll need to weigh each of these pros and cons to decide what’s right for you. For many people, online banking wins out – but if you need more convenient help, prefer to keep all your accounts in one place, or deposit money often, it may be best to stick with your trusted local bank.

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