These days, you may be hearing more and more people saying that they don’t trust banks and refuse to keep their money in a bank account. This comes as no surprise since national bank chains are notorious for hidden fees and strict requirements for opening and maintaining an account with them— which is also why more people are switching over to online-only banking. However, many people are skeptical of this banking method too. Here’s a look at four reasons why you should consider opening an online bank account over a traditional one.
The goal of having a savings account is to save money for a big purchase, or just to have some extra money when you really need it— and big bank corporations know and understand this. Traditional brick-and-mortar banks know this and offer 0.01% to 0.03% interest on your savings, helping to put a little more money in your pocket. This is a small number, but every little bit counts and it does add up after a while.
Still, you’ll want to earn as much as you can on your savings account, because what if you have an emergency and need to pull from your savings? Online banks typically offer a much higher interest rate (which is one of the few times you’ll want a high-interest rate) on your savings account, putting even more money in your account.
There once was a time when you could have a bank account at a traditional bank without being charged something called a “maintenance fee”. Maintenance fees are fees charged to help banks recoup operating expenses— so it makes sense for traditional brick-and-mortar banks to charge these fees, but they can still be annoying. These maintenance fees can be as low as $5 per month but can go up to $15 per month depending on the bank.
The good news is that some traditional banks waive their maintenance fees when you deposit a certain amount in your account every month. The better news is that most online banks don’t charge a maintenance fee at all. This is because they don’t have the same operating expenses as traditional banks.
Many ATMs charge a service fee if your account isn’t with one of their branches, and some traditional banks will charge you for withdrawing money from an out-of-network ATM. Depending on which online bank you choose, you may be able to avoid both of these fees. Your online bank should let you know where you’ll be able to withdraw cash without a fee if they offer this service.
In addition to depositing a certain amount of money in your account every month to avoid maintenance fees, some traditional banks require that you have a minimum daily balance. This is not a feasible requirement that everyone can meet, and some traditional banks will require a minimum deposit to open an account with them. On the other hand, online banks don’t usually have these strict requirements— and if they do, the requirements are much easier to meet than those of traditional banks.
Most people assume that online-only banks can’t possibly be as safe and secure as traditional brick-and-mortar banks, but this couldn’t be farther from the truth. In fact, many online-only banks are members of the Federal Deposit Insurance Corporation, meaning that they’re FDIC insured just like a traditional bank— usually up to $250,000. Banking with a good online-only is no more dangerous than using a traditional bank’s application on your smartphone— meaning that your information will be safe as long as you use safe online browsing and shopping tips. So open an online bank account today to start reaping the benefits that online-only banks have to offer.
Just as with a traditional bank, you must do your research to determine which online-only bank is best for you. There are some online-only banks out there that may charge just as many fees as a standard brick-and-mortar bank, and then there are also some traditional banks out there that don’t charge many— or any— fees. Your best bet would be to research some online-only banks because these are the type of banks where you’re more likely to find cheaper, less or no fees and you’ll also be able to earn more interest on the money in your savings account.