If you are starting to have second thoughts about traditional banks and are wondering how online banking works, you definitely should take a look at this guide!
In this guide you will learn the main differences between traditional banks and online banks, the pros and cons and tips to make your online bank account more secure.
Check out this analysis and give online banking a chance!
Why an online bank can be your best option
Traditional banks and online banks have a lot of things in common, but some advantages make these new banks attractive to web-savvy consumers. These are the best reasons to choose them:
1. Free Checking
In most cases, to qualify for free checking at traditional banks, you need to have your paycheck deposited into your account or keep a large account balance. Online banks give you the opportunity of having a checking account without the monthly maintenance fees that are usually imposed.
This is one of the top reasons to choose an online bank. Most online banks, offer free checking accounts to anyone, often, with no minimum opening deposit no minimum balance requirement. Additionally, the interest rate on cash in these checking accounts is generally not as high as the rate on an online savings account but is much higher than you can usually get at a traditional bank.
2. Higher Interest Rates
Online banks are known for paying higher annualized interest rates (APY) on savings accounts and certificates of deposit (CDs). The reason is that they don’t have to pay the huge costs associated with building and maintaining a physical office.
3. New technology has made them more accessible
While online banks have already produced innovative websites, they haven't stopped developing new ways to make online banking simple and are leading the way in banking technology. Making it possible to deposit checks through your computer or smartphone is among the latest accomplishments.
4. Most have extensive ATM networks
Many major online banks have partnered with national ATM networks to offer widespread access for customers, making it easier to withdraw money for free.
5. No Trips to the bank
Finally, people living in small communities may appreciate the anonymity that comes with an online bank—nobody will know about your financial transactions or habits since they won't see you carrying them out.
The pros & cons of online banking
Although the internet has been simplifying many everyday chores, there still are people who are fearful of online banking. So, let's take a look at the advantages and disadvantages of using the internet to manage your bank accounts.
The use of online banking has changed the traditional way in which banks work. It seems they have everything customers need, they even offer lower fees to those who manage their accounts fully online.
Nevertheless, many people still don't trust the online method.
Check the advantages and disadvantages of online banking and decide which is the best way to manage your bank account.
Online or offline banking?
These are the points to analyze the pros and cons of online banking:
- Security: This is the main issue of concern for those who don't trust online banking. However, offline banking also involves sharing with the bank certain information that will be later uploaded to the entity's network. And this could be just as vulnerable to hackers as the information you provide online.
- Fees: Online banks offer lower fees and especially consider those with smaller balances. Regarding savings accounts, offline banks require almost $5,000 to avoid fees in these types of accounts, while online banks only require $350 (average).
- ATMs: We already know that offline banks penalize those who use other bank's ATM. But, what about online banks? They often have agreements to avoid additional fees in many ATMs. Others even reimburse those fees you may be charged.
- Customer service: Online banks offer customer service via phone or computer. If you'd rather talk face-to-face, you should turn to traditional banks.
- Interest Rates: Online banks usually have better interest rates. Specialists assure that offline banks' interest rates could be six times higher.
- Deposits: If you were wondering how deposits work in online banking, it's quite easy. You can email checks to the online bank or use deposits (take a picture to the check and upload it to your account).
Tips to make online banking more secure
Sure, not having to go to a bank for every transaction is a bliss. And we need to thank technology for that, because online banking has made our lives a lot easier. But, of course, there are some downsides as well: What if you get hacked?
Unfortunately, nowadays we need to be extremely careful with our computers and the information we share online, or the way we keep our passwords or accounts secured. There are a lot of hackers that could potentially access that information and use it for something harmful.
Here are some tips for you to make your online banking more secure:
1. Be careful with your email
We have a lot of information saved on our emails. And if someone accesses it, they will also have that information. Now, what happens if you lose access to your online banking? You need to reset the password and, in order to do that, you need to call your bank, provide some personal information like your Social Security number and once you prove your identity, you can move on.
A hacker could simply get all this information from your email and then call the bank pretending it’s you. And even if they don’t try to get into your account and steal the money you have there, they could easily open a new account or get a loan or anything using your name. Protecting your credentials is the first step to make online banking more secure.
2. Be careful with your passwords
Yes, having a simple password that is easy to remember is really tempting. And using the same password to login to different accounts sounds like a great plan. But is it smart? No. You need to have different passwords for different things, because if a hacker were to guess one, then they’d gain access to all of your accounts and not just that one.
That being said, you need to come up with a safe and strong password that you can remember, but that is not that obvious for everyone else. Avoid using family names, dates or pet names that could be easily related to you.
Another good habit is to change your password every few months. This way, you are always one step ahead. Also, try adding two-step verification so that if someone manages to get ahold of your password, they will still need a pin to access your account and that pin is sent to your phone.
On top of this, the smartest thing you can do is to get rid of all the sensitive data you have on your email. Get rid of all the emails that could have your Social Security number, your bank account number or your credit card numbers.