With the world of banking becoming increasingly digital, online bank accounts have opened up new possibilities for managing your money. Today, it’s possible to do all of your banking online, forgoing a traditional brick and mortar bank entirely. A recent study by JD Power reports that 27% of consumers in the U.S. use an online bank as their primary bank. Your primary bank is typically defined as the bank where you deposit your paychecks on a regular basis, and most people utilize a checking account as their primary bank account.
While shifting your primary checking account to an online-only bank may seem scary, there are many potential advantages to moving your banking online. Let’s take a closer look at some of the pros and cons of online checking accounts.
Potential Advantages of an Online Checking Account
- Can Earn Interest. While most checking accounts don’t earn interest, many online banks offer interest-bearing checking accounts. Online banks typically have lower overhead costs than traditional banks because they don’t have to operate physical branches. Thus, they can pass those savings on to their customers in the form of interest. We typically think of interest as a tool to help our savings grow, but why not also earn interest on the funds sitting in your checking account?
- Fewer Fees. As stated previously, online banks typically have fewer operational costs than banks with a large physical footprint. This commonly results in higher interest rates for online bank customers, and it can also mean fewer fees. Most online banks don’t charge a monthly maintenance fee, and there are many that also don’t charge for overdrafts or for using out-of-network ATMs. At Bank5 Connect we charge very few fees, and we never charge our customers for using ATMs outside of our network. We even go a step further and reimburse our customers for fees the other ATM operator may charge, up to $15 per statement cycle.
- Better Online Experience. Since online banks were born in the digital era, and their offerings are fully online, they tend to really focus on the online customer experience. From user-friendly mobile apps and intuitive online banking interfaces, most online banks have the tools you need to effectively manage your money online. At Bank5 Connect, we even allow you to switch your direct deposit and recurring payments from another bank, fully online. We also allow our customers to order foreign currency online and send money to friends and family.
- Enhanced Security. Because the digital experience is front and center for online banks, they are naturally concerned with cybersecurity and protecting their customers from online threats. Standard security measures used by online banks include multifactor authentication, firewalls, fraud monitoring, account time-outs, and encryption. When choosing an online bank, you should also ensure that the institution is FDIC insured. FDIC insurance protects your deposits in the event of a bank failure, typically up to $250,000 per depositor, per bank. However, at Bank5 Connect we offer supplemental insurance on top of FDIC insurance. At Bank5 Connect, customers can rest assured that all of their deposits, even those that exceed FDIC limits, are protected by a combination of FDIC and DIF insurance.
Potential Downsides of an Online Checking Account
- No Physical Branches. One thing that deters some consumers from moving to an online bank is the lack of face-to-face customer service. Because online banks don’t operate physical branches, you can’t just walk into the bank and speak to someone when you have a question or problem. For this reason, it’s very important for you to do your homework before selecting an online bank. You’ll want to read customer reviews to get an understanding of their customer service track record, and you should research exactly how to get in touch with them. Try calling their customer service number to see if you can get a real person on the phone. See how long their phone wait times are, or how easy it is to get in touch with them by other means such as chat or email. At Bank5 Connect we know how important it is to be able to sort out your banking needs in the absence of physical branches. That’s why we offer phone, chat, and email support, as well as the ability for our customers to speak face-to-face with a representative through our Video Banking service. Video Banking also allows our customers to complete more complex transactions that would typically require a trip to the branch, or notarized forms.
- Limited Options for Depositing Cash. If you’re someone who routinely deposits cash at a bank branch, an online bank might not be the best fit. While some online banks do allow you to deposit cash at an ATM, many do not. The good news is that most online banks make it easy for you deposit funds into your account through direct deposit and mobile deposit. Most online banks also allow you to transfer money to and from other individuals, as well as other banks. Most online banks also have robust ATM networks to ensure that you can withdraw the funds you need.
For many, the advantages of an online checking account outweigh the disadvantages, especially for those who rarely visit a bank branch in person. If you’re interested in switching to an online bank and opening a checking account, just be sure to do your homework first. Compare interest rates, customer reviews, online tools, and support options to ensure you’re choosing a trusted and dependable online bank. If you’re interested in learning more about what an online checking account can offer, take a look at our high-interest Connect Checking account.