Some Benefits Online Banking Can Offer You
Online banking has revolutionized the way many people manage their finances. Just like traditional brick-and-mortar banks, customers can open checking and savings accounts, pay bills electronically, and transfer funds with an online bank. Many online banks accept mobile check deposits and issue debit cards linked to customers’ online checking accounts. Many offer loans and investment options. Some digital-only banks even accept cash deposits via an ATM.
And online banking can give its customers tools so that they can take care of their banking strictly through an online platform or mobile app. For the one in five Americans who fully bank online, digital banking has eliminated the need to visit a physical branch, fill out a deposit slip, and wait in line just to deposit a check. Online banks have made paying bills, following a budget, and saving easier and less error-prone.
One thing to note: Online-only banks offer only digital access. While online bank customers can typically reach a customer service representative when needed, they won’t be able to walk into a branch and speak with a teller face-to-face. For those who want that flexibility, many traditional banks have online platforms and apps where customers can access their accounts, allowing them to share in the convenience of online banking.
Convenience is the big appeal
In some ways, consumers see online banking as more convenient than banking with a traditional brick-and-mortar institution. In fact, the introduction of online banking has contributed to a decline in bank branch visits, which in turn has led to the closing of more than 8,000 physical bank branches across the U.S. between 2014 and 2019.
But convenience is just one of the reasons Americans choose to switch from traditional banks with brick-and-mortar locations to online-only banks. Here are some of the other advantages online banks have.
Higher interest rates
Some online-only banks can offer higher interest rates on deposit accounts than their traditional counterparts.1 They can do so because they operate with lower overhead, which allows them to bump up the interest earnings on checking, savings, and money market accounts, as well as certificates of deposit and other products.
With online banks, some customers may see interest rates that are 10 to 20 times higher than the nominal interest rates offered at brick-and-mortar banks. That can make a real difference when you’re working toward important savings goals.
Thanks to their lower operating costs and lack of physical branches, online banks can also sometimes offer reduced fees. Where traditional banks can tack on costs for banking needs such as ATM withdrawals and account maintenance fees, some online banks have eliminated many of those. And when online banks do charge, fees tend to be lower than what their traditional competitors charge.
Early pay day
Some online banks and financial services companies, including Stash2, can offer direct deposit up to 2 days early. This means your paycheck can be available to you when your employer deposits it, which is typically a couple of days before it would show up via traditional banks. Instead of waiting for your money to finally land in your account before you can use it, early direct deposit can allow you to pay bills, make transfers, start earning interest or take out cash sooner.
Online bill pay
The convenience of paying bills without writing checks or licking envelopes can also attract customers to online banking. Online banking can allow you to pay bills in a few clicks or to set up automatic payments for all sorts of bills like credit card payments, utilities, insurance and recurring subscriptions. The simplicity of online bill pay can save you the chore of keeping track of bills and remembering to pay on time, which means you can avoid late fees.
Keeping a close eye on your accounts can be critical to maintaining a budget, catching faulty charges, and ensuring that your finances are on the right track. That’s why easy access to your account can be so important. Online banking platforms typically make viewing your account and transaction details simple online or by app, so you can pull up the information you need anytime—and, if you’ve got your phone on you, anywhere. Many also provide tools for setting and tracking goals, so you can see how you’re doing and adjust your spending to reach your goals.
Whether you need to dispute a charge, verify a transaction or collect documentation for taxes, having all of your bank records accessible and searchable online can make the process simple.
Traditional banks sometimes make transferring funds to another account—or another bank—cumbersome and expensive. On top of high fees, in some cases you can expect a several-day wait before the money reaches your intended destination. With online-only banks, transfers can be faster—and less expensive.
While direct deposit has already eliminated the need for some trips to brick-and-mortar banks, paper checks still exist. That’s where mobile deposits come in. Online banking apps can allow you to deposit printed checks into your checking or savings account by taking a photo. There doesn’t have to be all the driving to the bank, filling out a deposit slip, or standing in line while you wait for a teller to help you.
Ability to sync with other banking apps
Many online banking platforms integrate with other financial institutions. That can be important if you use a different app to track your budget, check your retirement savings, or manage a different account at a separate bank, but still want to monitor all your money in one place.
What about cash?
Good to know: One big difference between traditional banks and online banks is that you can’t go to an online bank to cash your paycheck and walk away with physical cash. While the use of cash has decreased in recent years, this difference may be a drawback for people who still rely on cash for some purchases. However, some online banks do use an automated teller machine network, allowing you to use certain ATMs to withdraw or deposit cash. Some online-only banks will even reimburse you for any fees you’re charged when you use another bank’s ATM.
Bank from anywhere
Under the traditional model of brick-and-mortar banks, where an in-person visit was required, banking while managing work, school, travel and home life wasn’t always easy. Customers were limited to traditional business hours to open an account, apply for loans, or transfer funds. And if you weren’t near a bank branch or you were busy during operating hours, finding a way to take care of banking could be a hassle.
Online banking can solve that problem by allowing customers to log on and do their banking whenever and wherever it works for them.
Find out how Stash can help you manage your finances online.