What Is Online Banking?
Online banking is banking conducted virtually, either through a website or mobile app. Rather than going to a branch or ATM to manage your money, you can do so via your laptop or smartphone.
Most traditional banks and credit unions offer online banking services to their customers. The range of services available usually doesn’t differ that much from what you’d find at the best online banks. The difference is that with traditional banking, you also have the option of visiting a branch. With online-only banking, you don’t.
How Does Online Banking Work?
Customers of online banks can initiate transactions online, through a mobile app, by phone or by mail. They also can accounts they have at traditional banks, credit unions or other online banks.
Cons
Many people are switching to online banks, but they aren’t without their drawbacks.
No Branch Access
The most obvious disadvantage of online banks is that they don’t offer brick-and-mortar locations. This means you can’t do your banking in person.
ATM Networks May Be Limited
Many online banks have large ATM networks comparable to what traditional banks offer, but some online banks have a smaller or no ATM network. These banks typically offer some form of ATM fee reimbursements so you can use ATMs at other banks and not have to worry about fees, but these reimbursements may be limited to a certain amount per month.
May Not Accept Cash Deposits
Many online banks don’t accept cash deposits. If you regularly get paid in cash, make sure to find one that does—or opt for a brick-and-mortar bank.
Limited Range of Services
While plenty of online banks offer a full range of bank accounts, they may not offer all the financial products and services you’d find at a traditional bank. You may only have one option when it comes to choosing a checking or savings account, and some online banks don’t provide lending or investment services.
Online Banking Safe?
Generally, online banks are safe. Look for the Federal Deposit Insurance Corporation (FDIC) to insure your accounts. Online banks with FDIC insurance have the same protections as banks with branches.
In many ways, online accounts are safer than traditional bank accounts because of online statements and the focus on digital transactions instead of paper checks. Avoiding paper statements and checks eliminates an that many thieves take advantage of.
You can open a bank account online via your chosen bank or credit union’s website or mobile app. From there, you’ll generally follow the same steps that you would tot a branch. Here’s a typical step-by-step process for opening a bank account online:
Visit the bank or credit union’s website, or launch its mobile app.
Find the type of bank account you want to open, and fill out an application for a new account.
Verify your identity and provide other required information, which may include your address, phone number and email.
Make a minimum deposit, if required.
Wait for your deposit to clear, which may take a few days. Then, start using your new account.