navigating the online modern world of banking
During the current pandemic, online banking options have seemed like a more valid choice than ever. Many of us have been looking for ways to limit our interaction with others, so opting to deposit checks through our phone instead of at the bank is obviously a smart choice. For those of us who have grown up with banks’ online services, they may seem commonplace. However, there’s no denying that online banking is a new and scary world for many people, and even those who are comfortable with it don’t actually know much about the reality of it.
Additionally, in the last decade or so, we’ve seen the rise of online-ONLY banks, which are depository institutions that choose to forgo brick-and-mortar locations and provide all their services through their app or website. There are advantages in this, like not spending money on rent or building maintenance. However, there are still questions we as conscious banking customers must ask these institutions about what’s actually being done with our deposits when we’re not using them.
Throwing these options into the mix, it may seem harder than ever to choose where you’re going to bank and how you’re going to do it. We’re here to walk you through some of the common myths and truths of online banking, so that you can feel more confident making informed decisions about where and how to bank.
Truth: Online-only banks can mean fewer costs and fees.
The main appeal of online-only banks is that because they don’t have to pay rent on a building, or pay employees to maintain it, they often offer banking services with fewer or lower costs to their depositors. Although this isn’t universally true, most online-only banks are cheaper than traditional banks and credit unions. For the same reason, online-only banks can often offer higher interests rates or annual percentage rates (APYs) on savings. However, it’s always important to mention that credit unions also tend to offer lower costs and fees because they’re non-profits.
Truth: Online banks and banking services are not as personal or relational.
The biggest difference between a traditional banking experience and an online one is that when you’re in a bank or credit union branch, you’re talking to and working with real people, while online banking practices are often automated. You don’t have the opportunity to build a personal relationship with the employees of that bank. This makes it that much harder when you need more complicated banking services, such as loans, or when you need to make changes to your accounts. Traditional bank employees are also more likely to have an in-depth understanding of the communities they serve, because they’re a part of these communities themselves, especially at small, local institutions.
Truth: Online banking and banks have more limited banking services.
Sure, you can deposit checks through online banking, but it’s another story when trying to deposit or withdraw cash. Many online-only banks offer free access to network ATMs, but you have to be sure that there’s a network ATM in your area or that there isn’t a limit to the number of free transactions. Additionally, when online banking, you don’t have access to many of the expansive options available at many traditional institutions, for example if you need something notarized or if you need a brokerage or insurance account through your bank. Traditional banks are the much better option for customers looking for expansive bank services.
Truth: Online banking and banks lack transparency.
We’ve talked a LOT on this blog about the importance of transparency in banking (we even wrote a whole article about it), and although online-only banks are regulated by the same federal institutions as traditional banking options, on the whole, it’s much harder to find out what’s actually being done with your deposits. A lot of these banks specify that they actually keep your money at a traditional bank, and in this case, you can research what kind of lending that bank typically does. But there’s no real way to see if your deposits are being used the same way.
Myth: Online banks and banking are less secure.
As long as your banking option is FDIC- or NCUA-insured, whether they are online or not, your deposits (up to $250,000 per depositor, per institution) are federally protected against bank failure or theft. If you check the bottom of your bank or credit union’s website, it should say that they are federally insured by either institution, or you can double check with the FDIC itself. Otherwise, your online banking security simply comes down to YOU, using the provided services in a secure way. Here’s a resource for safety precautions to take when banking online.
Myth: Online banks and banking are more convienient and straightforward.
Although there are plenty of banking services online which provide great convenience to their users, for many people, it’s often easier to speak to a person directly when making bigger decisions about your money. Online services can be confusing, constantly changing and updating, and hard to use. It can also be difficult to actually get help when you need it. When handling anything besides basic banking services, we often need the nuance and experience of a trained employee to fully handle our needs. It may take a bit longer, but it’s worth it when it gets done right the first time.
Myth: Online-only banks provide higher “returns.”
Most people think that banking is an individual practice that only concerns them and their finances. However, banks and credit unions provide essential services in our local economies which have established the communities we live in today. While you might (or might not) earn more interest at an online-only bank, your deposits aren’t having the same impact that they would at your local, community bank. The real “return” you get from your Better Banking Option is the impact your bank or credit union creates by making wealth-building loans in your neighborhood, town, or city. Consider the monthly fee a cheap donation to an incredibly impactful cause.
Myth: Small and local banking institutions typically don’t have online banking options.
It’s undeniable that in today’s world, going to the bank for every financial transaction you make is unrealistic. That’s why many people are choosing to bank online with mega banks and online-only banks, because they claim the most convienient banking and the cheapest costs. However, many smaller local banks and credit unions also offer online banking options, while also providing quality loans to your community. Often, there’s a Better Banking Option in your area which provides many of the same online conveniences of these larger and online-only banks. You can find one easily with our search engine.