7 reasons why you should use an online bank
If you’ve been hesitant to open an account at an online-only bank, you’re not alone. However, you could lose money.
A recent study on consumer banking preferences by The Ascent shows that the majority of consumers still haven’t opened an account with an online-only bank. In addition, almost a quarter of those polled said they would not be ready to do so. Here’s why it’s a mistake.
1. No monthly fees
Most traditional banks charge a monthly maintenance fee to keep your checking and savings accounts open. These fees are unnecessary and eat up your hard-earned money. Some accounts will waive the monthly account maintenance fee if you maintain a certain balance or receive a certain number of monthly direct deposits. But you shouldn’t have to worry about whether you’re going to meet these month-to-month requirements.
The vast majority of online banks don’t charge monthly fees for checking or savings accounts, and that alone is reason enough to change.
2. No ATM fees
ATM fees may add up. Either you have to do everything you can to find an ATM on the network, or you end up paying ridiculous fees just to withdraw your own money. Sometimes you will even be faced with two fees – one from the ATM provider and one from your bank.
Many online banks offer checking accounts that don’t charge ATM fees. Some will not charge for using an off-network ATM and a few even offer unlimited ATM fee refunds to cover fees charged by ATM providers.
3. No foreign transaction fees
The typical overseas transaction fee is 3%, and you will be charged this fee each time you use your debit card overseas. This means that for every $ 1,000 you spend abroad, you will be charged a fee of $ 30.
It’s rare to find a debit card that doesn’t charge an overseas transaction fee, and even rarer to find one offered by a bank that doesn’t charge a monthly fee. However, there are several online banks that offer free checking accounts with no overseas transaction fees.
4. Earn interest on your money
Most major banks will pay between 0.01% and 0.03% interest on your savings, if so. And checking accounts rarely pay interest unless you have an extremely high balance. This means your money stays there, losing value against inflation.
Online banks offer what are called high yield savings accounts. These accounts can pay interest rates at least 10 times higher than what a traditional bank would pay. In addition, some online banks even offer checking accounts that earn interest.
5. No balance requirement
It is not uncommon for large banks to have several different balance requirements for checking and savings accounts. Typically, they will have a minimum opening deposit requirement of $ 25 to $ 100 or more. They may also require you to maintain a minimum daily balance. It is not feasible for everyone.
Online banks have much more flexible balance requirements. Many have no opening deposit requirement at all. Those that tend to be quite low. Most also don’t require you to maintain a certain monthly balance.
6. Free budgeting and savings features
Exclusively online banks tend to be much more forward-thinking when it comes to their online and mobile banking features. Many have integrated all kinds of convenient, free savings features and budgeting apps to help you manage your money.
Some online banks even integrate budgeting apps and credit tracking tools into your account. This allows for a more robust banking experience to better keep your finances on track.
7. They are safe
Some people are concerned that online banking is somehow less safe and secure. But in general, this is not the case. Most major online banks are FDIC insured, which means your funds are protected, typically up to $ 250,000. You’ll also find standard security and fraud protection features like multi-factor authentication, data encryption, and account monitoring at any good online bank.
As with everything, make sure you do your due diligence. When choosing an online bank, read the reviews and review the features of each account. This way, you can make sure that they are truly free, that they offer good rates, and that they have top notch security. The right bank account could help you earn and save a lot more.