Should I Switch to an Online Bank?

Should I Switch to an Online Bank?

Online Banking

Online banking is becoming increasingly popular with the younger generation, but not everyone remains convinced of its merits. Unfortunately, many local branches are closing as banks seek to reduce their operating costs, so there will undoubtedly come a time when you have no choice but to bank online. In the meantime, however, here is a quick guide to help you decide whether online banking is a smart move – or a one-way ticket to financial disaster.

Pros of Online Banking

Online banking has a lot of positives. Because online banks have lower operating costs, they can afford to be more generous with their interest rates and range of products. Do a product comparison to see whether you can secure a better saving rate for your nest egg – the best online banks can often beat their high street rivals by as much as 0.5%.

Some online banks offer additional rewards such as loyalty schemes and new customer bonuses. Again, it is worth shopping around before you make a final decision.

Lastly, because an online bank doesn’t rely on a physical location for its branches, you can open an online bank account anywhere, and still access it no matter where you move to. This is very convenient for people who move around frequently, as it saves you the hassle of moving your account to a new branch or relationship manager each time.

Cons of Online Banking

As you might expect, it isn’t all a bed of roses. Most people prefer talking to a real person, in person, when things go wrong. With an online bank, you are restricted to a call center. Whilst high street banks also run call centers, you can at least visit your local branch if you have a problem or query. Talking to a human being rather than a disembodied voice is rather more comforting – especially for the older generation. After all, there is nothing more frustratingthan trying to resolve an issue with your account when the customer service assistant doesn’t speak very good English and is reading from a script.

Depositing cash and checks is tricky with an online bank. You have no choice but to send deposits via the post, which is hardly safe if you have a wad of cash to pay into your account. In this instance, offline banking is preferable. There may also be delays when waiting for funds to clear after you deposit money in an online bank account, as all deposits must go through central clearing. When you pay cash in over the counter, it clears immediately.

Lastly, access to online banking is dependent on a functional internet connection. If you live in a rural area with poor internet service, online banking is never going to be a viable option.

Make the Right Decision

Weigh up the pros and cons, check the account options, and make a final decision. Also, make sure that any bank you consider opening an account with is fully regulated and guaranteed by the FDIC.