online banking

The Pros and Cons of Online Banking

By this point, there are very few aspects of our daily lives that haven’t extended to the internet and the world of online.

From social media, to communication, to education, there is practically nothing you can’t do online. So, you might be wondering what kind of options the internet offers when it comes to storing your money and keeping it safe. In other words, what options you have when it comes to online banking.

One possible option that you may be considering is moving over to online, or internet banking. Before you do that, however, it is wise to get all the facts on what internet banking actually is.

What is online banking?

Whenever you are moving serious information online, you should make sure that you know the ins and outs of what you are getting yourself into. It’s the first question you should ask yourself.

Before you decide to start an online checking or savings account, it is important to know what you can expect. Essentially, online banking means taking care of your financial dealings through banks that operate entirely online.

While established banks like Chase, Bank of American, and Wells Fargo have now made it possible to manage your accounts entirely online, actual online banking is something very different.

An online bank is typically only accessible through the world wide web. While that lack or IRL accessibility does come with some negative aspects (that we will go into a little bit later), it also has some fantastic benefits.

The most glaring benefit is that because online internets do not have brick and mortar establishments and so do not have to pay for upkeep. That typically means that online banks can afford to offer higher rates and lower fees than traditional banks can. On top of that, the most reputable online banks are just as dependable as traditional banks.

It’s all about finding the right option for you. To help you do that, here are some of the major pros and cons of online banking.


  • Lower fees and better interest rates:  This was already mentioned above, but it’s important to really understand what this means. Because online banks don’t have to spend money on their many branches across the country, they tend to have lower or no fees, and higher interest rates on deposit accounts. The best online banks have Annual Percent Yields (APYs) upwards of 1.60%. Compare that to the .01% APYs offered by many traditional banks and the national average of .07% and you can see how you’ll be making quite a bit more with an online bank.
  • Free ATM access: You might be worried how you’ll be able to access your cash if you can’t head to your bank’s brick and mortar establishment to withdraw wither with a teller or an ATM. Don’t worry, well-established online banks such as Allpoint or MoneyPass have thousands of ATMs all over the country. Of course, you’ll probably want to make sure that there are ATMs in your area, but after that you should be good to go.
  • Security: This may be another concern of yours before you sign up, but you’ll be happy to learn that established online banks are actually considered to be just as safe as traditional ones.


  • There is no in-person assistance: This might be a deal breaker for some people that feel the need to talk to bank tellers in person. Online banks rarely have branches  – sometimes they are available in cities – so you’re going to have to be prepared to have your questions answered over the phone. If you value in-person communication, this might not be for you.
  • Limited checking: This is another potential pitfall of online banks. If you are someone who likes to pay with check, be aware that many of the online banks that offer the highest APYs do not offer checking accounts.
  • Cash can be a problem: Online banks can also be troublesome for people who deal in cash a lot. Online banks can make it fairly hard to deposit cash. If you’re not comfortable having a lot of cash lying around your apartment or home, you might want to either make sure that your online bank deals with cash in a streamlined way, or avoid them altogether and stick to a more traditional bank that allows you to deposit cash on a daily basis.

How to be sure that you are banking safely

One thing that you likely have questions about if you are curious in online banking deals with whether or not online banking is safe.

In this day and age, it’s not uncommon to be quite wary of sharing personal information, and putting large amounts of money into the hands of online companies. There are ways to make sure that you’ll be treated fairly and safely by your online bank, though.

First, check to make sure that your prospective online bank is insured by the Federal Deposit Insurance Corp. you should also check to make sure that security measures like encryption and fraud monitoring are offered as well.

To protect yourself while online banking, avoid logging onto your bank while using public Wi-Fi and watch out for suspicious emails or messages.

Is online banking right for you?

Now that you have all of the information, you may be coming to the final question of whether or not online banking really is right for you. Before you sign up, consider checking in with local banks and credit unions to see if there are other established institutions that fit your needs and values.

It’s also wise to remember that you can actually do both if you want! There’s nothing wrong with having multiple bank accounts and no one is forcing you to do one over the other. In fact, having both an online bank account and a traditional bank account can offer you the best of both worlds. You can easily handle checks and cash with your traditional bank, while also getting those great APY numbers that the online banks can offer.

The options are at your fingertips. All you have to do is figure out what option is best for you, and take the necessary steps to make sure you are being a responsible, safe, and smart banker!

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