Pros and Cons of Online Banks

by Greg DePersio

2 min read

An online bank lets you conduct all your banking activities, such as depositing checks and transferring funds, from a computer, tablet, or smartphone. With an online bank account, you never visit a local branch because the bank usually doesn’t have one. This presents both pros and cons to you, the bank customer. Sometimes it’s nice to develop a personal relationship with a banker who understands your unique circumstances and can tailor lending or investment products to fit your needs. With an online banking account, you don’t get that personalization. But what you get in return are lower fees, better interest rates, and increased online capabilities. For many businesses, moving your bank account online makes perfect sense.

No Branches

Strictly online banks don’t have physical branches. This means you can’t walk in and have a face-to-face meeting with your personal banker. Many customers view this as a disadvantage. A good personal banker takes the time to get to know his or her customers, and can steer them toward financial products that fit their needs. A local banker, in some circumstances, can modify terms to meet a customer’s extenuating circumstances. Maybe you don’t meet the bank’s stated credit requirements for a loan, but since you’ve been such a good customer, the banker is able to push your application through anyway.Physical branches also offer convenience to businesses that make regular large cash deposits. With online bank accounts, cash deposits have to be made at participating ATMs. This can be inconvenient and a safety concern when you’re dealing with large sums of cash.

Lower Fees, Higher Interest

Perhaps the biggest advantage of online banking is that fees are lower and interest rates are higher. Because online banks don’t have the overhead required to maintain physical locations, they pass the savings to customers. A popular feature with online banks is the high-yield checking account, which lets you earn interest on your everyday funds just like a savings account. While most physical banks still impose minimum balances to avoid paying fees, online banks typically have no such requirements.

Increased Online Capabilities

You can bank online no matter where you keep your accounts. But strictly online banks tend to have the most user-friendly websites and apps, and offer the most robust capabilities. If you want to deposit a check, simply take a picture of the front and back of it with your smartphone, and upload it to your online banking app. If you have a sum of money to invest, your online bank’s investment analysis tools can help you allocate it based on your stated goals. Some banks have online features for developing your monthly budget and forecasting your business’ future revenues.

Business Banking Online

Whether it makes sense to move to an online bank account depends on your business. If your business deals with large sums of cash every day, you might think twice. Online banks haven’t developed anything that matches the convenience of taking your cash to your local branch, dumping it on the counter, and letting the teller deal with it. But for companies that conduct most of their business online anyway and rarely deal in cash, online banking offers the chance to save money and streamline operations.With online banking, you give up the convenience of having a personal banker at a local branch, but in return you save money on bank fees and have the chance to earn higher interest rates.

References & Resources

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