Albert, What Are Online Banks?
Generally, the advancement in technology has reduced the difficulty of most things. One of these things includes the system of banking. Most of the time people are busy with various attention-seeking tasks; hence going to banks to perform a particular transaction does not sit well with them. To correct this you will need an online bank account.
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Online banks are generally created for those with limited free time. It is also beneficial for those who stay far away from any bank or credit union branch. In the traditional bank settings, you would be required to fill a deposit or withdrawal slip. This however depends on the type of transaction you are about to make. This main process is feasible only if you are in the bank. Meanwhile, you do not need all of these factors to complete a transaction with an online bank.
What is online banking?
Online banking is an electronic payment system also referred to as web-banking or internet banking. It enables the performance of a variety of bank transactions through the financial institution or bank’s website. What this means is that you will be able to manage and access your bank account with your mobile or computer device. Hence, you would not need to follow the processes involved in traditional banking systems.
Although most traditional credit unions and banks tend to function like online banks. That is they also offer or allow people to have access to their bank accounts through the internet. Meanwhile, it is totally different from the online banking system. You would not be required to meet a banker face-to-face with an online bank account. Your computer or mobile devices are what you need to have access to your bank account.
Why you should open an online bank account
“Why should I open an online bank account?” This is one of the questions most traditional bank customers ask. Most of them think online and traditional banking systems offer the same benefits. They most times think they are the same with the exception of the use of the internet.
If you are part of the many people with these thoughts in mind, you are getting it all wrong. First thing first, traditional and online banking are different in processes and benefits. One of the benefits that make people sign up for online banks is the convenience it comes with.
In terms of convenience, you would not be required to visit a credit union or bank to perform a financial transaction. Most of the time, banks are always filled with people in a long queue. This could be frustrating especially if you have somewhere to be. Meanwhile, with an online banking account, you would be able to complete your transaction at your convenience.
The convenience that comes with using online banks also saves you time.
Traditional banking accounts, such as savings accounts are interest-producing. Although the interest they offer is usually small with high fees. If you are looking for a bank account with higher rates and lower fees, you should use an online banking account. You can find out more about this by comparing their annual percentage yield (APY).
The best online savings accounts generally have a higher APY of about 0.45%. On the contrary, the savings accounts of most traditional banks offer a lower APY of about 0.01%. Hence, if you are in search of a savings account with a higher interest rate, you should consider online savings accounts.
In terms of lower fees, traditional banks and credit unions charge more. This is however different in online banks. This fee primarily has to do with branch maintenance. Since online banks are through the internet, the cost of branch maintenance is never considered.
On the other hand, most traditional banks usually charge their customers about $10 for maintenance fees per month. Depending on your minimum daily balance, you could be free from this maintenance fee. That is if your minimum daily balance is above $1500.
Disadvantages Of Online Banks
Although there are various benefits of online banking systems, they also come with some limitations. In some cases, you may need to use a traditional bank account to access your online bank. The limitations that come with online banking include the following:
No bank branches
Difficulty in depositing
No bank branches
This factor defines how beneficial an online bank is in terms of convenience. At the same time, it is a limitation, especially when you need in-person help. Although most online banks offer phone-based customer care services, they can never be as helpful as face-to-face meetings.
Ultimately, some online banks offer assistance through online chat and social media. Meanwhile, it is not effectively helpful because not everyone can explain the challenges they are facing with texts.
Difficulty in depositing
This is one of the primary limitations of online banks. For a successful deposit, you will need to source for a deposit-accepting ATM. In addition to this, you can successfully deposit in your online bank account by using a traditional bank account. This process primarily involves the depositing of cash in a traditional account then transferring it to your online bank account.
Conclusion
Online banks come with several benefits most people require. At the same time, they also expose you to some limitations. Hence, deciding if it is the best depends on what you need.
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