The popularity of online-only banks is surging, thanks to their convenience, low fees and higher-than-average interest.
An online bank is exactly what it sounds like: Every aspect of the banking process is done online. There are no branches, no tellers, no waiting in line to deposit a check.
But some people have been skeptical about the idea of banking without a storefront. Here are the 2 most common myths about internet banking, debunked.
With an online-only bank, you deposit or withdraw money without ever dealing with a person. That missing element can make the whole thing kind of scary. And with so many headline-grabbing data breaches in recent years, that fear is understandable.
Data breaches are a problem that all banks, whether they’re online-only or have a storefront, have to contend with. But a solid internet-only bank will offer the same security and protection as any other bank.
You’ll want to make sure your potential online bank offers the following:
When a user is required to provide 2 ways to prove who they say they are. Some financial institutions may require, for example, that you provide a password when you log on and a phone number that can receive text messages. The bank would send a text to that number when you attempt to make account changes.
Online banks offer the same amount of security and protection as other banks. You should research a virtual bank’s policies and customer reviews, the way you would with any bank.
It’s true that there are some conveniences traditional banks offer that online-only banks can’t. You can’t, for example, walk into an online bank and deposit a check. But online banks are aware of these limitations and offer workarounds. And these workarounds aren’t that difficult or inconvenient.
“Customers can deposit funds how and when they want … by snapping a picture of a check, setting up direct deposits, incoming wire transfers from any U.S. bank or mailing in deposits with postage-paid envelopes,” says Andrea Puchalsky, Ally Bank’s communications director.
Here are a few additional examples of common online-banking solutions:
How online banks handle common transactions:
|Traditional banking services||Online-banking solution|
|Depositing cash.||Most online banks use the Allpoint ATM network, and Allpoint ATMs allow cash deposits.|
|Withdrawing money.||You can withdraw money at plenty of ATMs. Many online banks will reimburse any fees incurred.|
|Reaching customer service.||Most online banks offer 24/7 customer service support, via phone, email and chat.|
Overall, internet banking is pretty convenient. But you may run into the occasional drawback, depending on your needs.
For example, there are withdrawal limits for ATM transactions, often $1,000 per day. If you need more than that for any given reason, it can be inconvenient because you can’t just walk into a bank and talk to a teller.
However, some online-banking users work around this by going into another bank’s branch and asking for a cash advance on their online debit card. And unless you’re regularly withdrawing large sums of money, this likely won’t be an issue.