Pros and Cons of Online Checking Accounts
If you’re used to doing your banking entirely in person, the idea of shifting your finances online might seem intimidating. After all, paying your bills and making timely transfers are important parts of maintaining order in your life. However, shifting to online banking can often make life easier. To help you decide if online banking is right for you, we’ve taken a closer look at the pros and cons of online checking accounts.
Because you’re no longer tied to a physical location, you can do your banking from anywhere. And you can even automate things like bill payments. So, you can make sure you never miss a payment again. Before you make the switch, though, it’s important to understand both sides of the coin when it comes to online checking accounts.
Let’s dig into the details, so you can make a more educated decision about going digital.
Pros and Cons of Online Checking Accounts
Pros of Online Checking Accounts Explained
Higher Savings and Lower Fees
Brick-and-mortar banks have a lot more to deal with financially than digital banks. For example, they have more physical locations to worry about. And within these physical locations, they have staff to pay, supplies to buy, and construction costs whenever a new location goes up. The end result of all of these financial responsibilities is typically fewer savings passed on to the customer.
So, one advantage checking accounts from online banks tend to have is higher percentage yields.You can see this in the annual percentage yields available in checking accounts from online banks, which can be 1% or higher. On the other hand, 0.04%. is the U.S. average annual percentage yield (APY) for traditional checking accounts.
The savings tend to continue in fewer and lower fees, as well. Plenty of online checking accounts have minimal to no monthly maintenance fees, transfer fees, or transaction fees. Plus, many online banks even reimburse you for withdrawing from out-of-network ATMs. So, the disadvantage of fewer in-network ATMs isn’t as crucial as you may have thought. Additionally, many online banks that charge fees for e-transfers often rebate you at the end of each month.
Anywhere, Anytime Banking
Online banking has made great strides. Now you can easily do all of the tasks you would usually do in-person from your phone or computer. For instance, in many cases, creating an account online takes mere minutes. If you’re new to online banking, you can also have an online representative from your bank guide you through the process. And if you’re concerned about online safety, there are easy protection measures you can take.
Where an online checking account really shines, though, is in mobile banking. For example, you can pay bills, review your balance, and take care of all of your standard banking tasks from the convenience of your phone, no matter where you are. So, any mundane chore, like waiting in line or walking to the store, turns into an opportunity to take care of some banking. In short, online banking is convenient.
Many online banks even allow you to essentially turn your phone into a debit card. If you have multiple accounts with a bank, such as a checking account and credit card, you can create a virtual “wallet” on your phone to replace your physical wallet. If you’ve ever realized you forgot your wallet at the checkout counter, then you know why this option is helpful. Simply pull out your phone, open your virtual wallet, and pay as if you’re a regular debit card.
Finally, you’ll often find that many online banks offer helpful features that extend far beyond standard banking tasks. For example, online banks often offer supplemental features for budget tracking, automated bill payments, and credit tracking.
Cons of Online Checking Accounts Explained
Lack of In-Person Support
If part of why you enjoy banking is the relationship you have with in-person bank tellers, then online banking may be an adjustment. Because everything is taken care of on your phone or computer, there are often few-to-no physical branches.
That said, online banks tend to make up for this with outstanding online or phone support. Some even offer video calls to capture the feeling of face-to-face support from a friendly bank teller.
Fewer In-Network ATMs
As already mentioned, ATMs, or lack thereof, can be an issue with online banks. Because online banks tend to have smaller ATM networks, it can be harder to find an in-network ATM to make deposits or withdrawals. So, in an emergency, you may find yourself using an out-of-network ATM that has fees.
If your bank offers out-of-network rebates at the end of each month, then this might not be a huge issue.
The Bottom Line of Online Checking Accounts
When it comes to deciding whether or not to open an online checking account, it really comes down to how you prefer to do your banking. For example, if you want the ability to do your banking anywhere, anytime, and benefit from more savings while you’re at it, then an online checking account may be the way to go. But if you prefer to do your banking face-to-face, then a brick-and-mortar bank may make sense.
That said, you don’t always have to choose one or the other. Many banks offer a hybrid model that offers both some in-person branches and a robust suite of online banking products. As you consider opening an online checking account, it’s a good idea to compare the top online banking providers.