The Advantages and Disadvantages of Online Banking

If you believe all the reports, online banking is the wave of future and conventional banks will be largely phased-out. The traditional banking institutions have been closing banks left and right. This trend is expected to continue.

Online banking seems to have everything a customer could want. The interest rates on accounts are higher than in regular banks. The fees are lower, and you can still access your money anywhere.

The differences are diminishing all the time. Banks are adding more online banking options in an effort to cut costs and satisfy the demands of customers.

The following comparison will help you understand the differences:

  1. The main issue that prevents many people from fully embracing online banking is security. But this concern is somewhat misplaced. A regular bank also stores all of your information in networks that are just as vulnerable to hackers as those of online banks.
    • While there is risk, the risk is the similar with both options.

  2. Online banks typically offer lower fees. Online banks are especially kind to those with smaller balances. Traditional banks require, on the average, almost $5,000 to be kept in a savings account in order to avoid additional fees. Online banks only require an average of $350. Twice as many online banks offer free checking.

  3. Look at the location of ATMs and the associated fees. Traditional banks have their own ATMs, and you’ll be penalized for using other ATM’s. Check out the location of the ATMs near your home and work. Are they convenient for you?
    • Online banks often have agreements in place that allow for withdrawals without additional fees at many ATMs. Some online banks will reimburse the fees you’re charged, up to a certain limit.

  4. Interest rates are usually better at online banks. Online banks don’t have the expenses of building and operating physical businesses. They aren’t just a little higher – they’re 6 times higher!

  5. Customer service is comparable in terms of quality. With online banking, the customer service will all be done over the phone or computer. If you need to talk  to a face, then traditional banking is for you.

  6. Deposits are different, but easy with both. Banks always make it easy for you to deposit more money. Checks can be mailed to online banks, but eDeposits are also an option with many.
    • You can simply take a picture of the front and back of your check and upload that to your account. Done. Most people, however, seem to be more comfortable depositing a check in person.

Over time, most experts agree that traditional banks will continue to close more and more branches. As younger people grow up, the rate at which this occurs will only accelerate. The primary issue is the acceptance of the technology.

The older banking customers tend to be the most resistant to technology. As these people are replaced, online banking will be more acceptable to the population as a whole.

Younger customers are especially interested in online banking, since the account minimums and reduced fees are more congruent with their financial situation. As these customers age, they are unlikely to move their banking to a conventional bank.

The choice is yours. Online banking and traditional banking offer many of the same services and conveniences. Online banking is less expensive and offers better interest rates. Traditional banks have a physical presence and a friendly face. Which is more important to you?

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