Online Bank Accounts: Pros and Cons

More and more people are increasingly using online banks as opposed to brick-and-mortar banks. With online bank accounts, you’ll conduct all of your banking via computer or smartphone.


You can handle things like paying bills, transferring money, and checking your balance all without having to go anywhere - a convenience highly coveted by many. Deciding who to bank with is important because you’ll want to use an institution that meets your financial needs and that works well with your lifestyle. In this article, we’ll discuss the pros and cons of using online bank accounts.

The Pros of Online Bank Accounts

  • Increased Convenience - Certainly nothing beats the convenience of online banking. The ability to access your account from anywhere, and on most devices, can be extremely useful.
  • Lower Fees - Most online banks provide lower account fee options. This is generally because they have much lower overhead costs (no brick and mortar) and thus they can pass the savings on to you.
  • Possibility for Higher Interest Rates - Savings accounts with online banks can have the added bonus of higher interest rates. Many brick-and-mortar banks will offer .01% APY, whereas you can often see an APY of 2% or higher with online banks. Higher APY rates mean your money is truly working for you, instead of just sitting in an account; this can mean seeing an increase of a few thousand dollars over the years as opposed to an increase of a few hundred.
  • Security - It’s important that the institution in which you keep your money has up to date security features. While there is no physical location, online banking can be trusted in the same manner as traditional banking. It is important, however, that you check to ensure the bank you use has fraud monitoring, encryption, and is FDIC insured.
  • No-Fee ATM Access- With traditional banks, you can typically use their owned ATMs for free; however, when you utilize any other banks ATM you’ll usually be hit with out of network fees. With online banks, most of them will allow you to access tens of thousands of ATMs without incurring any fees for withdrawal.
  • Better Technology - Because the banks are purely online, you can often find that the technology offered is better. Some perks you can look for:
    • Mobile checking options, including depositing checks by picture taking
    • Budgeting assistance
    • Automatic transfer options
    • Online account info downloads, great for taxes

The Cons of Online Bank Accounts

  • Deposits Can Be More Difficult - Usually, deposits aren’t a problem, as most employers these days can direct deposit your paycheck into your account. However, if you have a situation where you have cash that needs to be deposited, your options are limited with online banks. You can consider transferring the cash into a money order and then mailing it in or depositing it using a mobile app, but that is an extra step most don’t want to deal with. If you deal with cash often, you may want to consider a traditional bank instead.
  • Lack of Personability - While online banks can have great customer service, sometimes it’s preferable to speak to a representative in person. You do not have this option with online banks. You can also expect to speak to different representatives almost every time with online banks; whereas with traditional banks you do have the opportunity to build a history with employees.

When making our decision, it’s important to carefully weigh the pros and cons of online banking usage. While online banking offers unique perks, it isn’t the optimal choice for all situations. Many local banks have grown in the online options they have these days, as well, making for a well-rounded choice in banking.

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