Online Banks
There is a new wave in the market when it comes to how we receive services. The key difference is the number of human interactions we receive nowadays to obtain the services we want. Today services are done by computers or via online platforms where we never see the person providing the service to us.
Financial services have also been going through this shift, and one key area is banking. Companies are popping up everywhere called ‘Online Banks.’ Online Banks are institutions that offer limited to no physical branch presence while providing banking services.
Below I will discuss their pros and cons of online banking.
Benefits of Online Banks
Higher returns on your investments: The main benefit of using an online bank are the interest rates. The interest rates on their savings accounts are usually higher than traditional banks since their overhead is lower. There are no branches to maintain, no tellers to pay for, no branch managers or janitorial staff. Without those added expenses, banks can pass these savings on to their customers.
Low fees: In addition to higher returns, online banks also have fewer fees.
No need to go to a branch: As a result of being entirely online, everything you need to do can be done online at any time. Imagine opening up a new CD on Sunday night. You do not have to wait for the typical banking hours.
Drawbacks of Online Banks
Websites Downtime: It is rare, but not unheard of, for the websites to go down. These downtimes can last a few hours and could force you to use the phone, or worse, be unable to make an important transaction.
No Branch: There is something comforting about being able to talk to a human face to face, even the ability to yell at them if something goes wrong makes us as humans feel better. This fact will ensure that for complex financial transactions a personal banker will always have its place.
Possible High ATM fees: Some online banks have extensive fee-free ATM networks, but not all of them do. Trying to receive money from an online bank could result in more ATM fees. This can make getting cash more expensive.
Deasil’s Advice
Online banks are a great place to hold long-term savings and money beyond two months’ worth of living expenses. These accounts can really juice up the returns the cash you have on hand can produce. Because of the cons above, I recommend following the steps below if you are considering opening an online bank account.
Steps
- Find a traditional full-service bank/credit union that does not charge fees to perform traditional banking functions.
- After saving over two months of living expenses at the traditional bank open an online checking account
- As you increase your savings above the 2-month emergency fund level, take that amount and transfer this to your new high yield online bank account.
- Enjoy the juicy extra returns of online banking!
If you follow these steps, you will alleviate most of the cons of investing in an online bank. For more information about online banking, please email me at Deasil@rasadeasiladvisors.com.
Randall Avery
Financial Advisor │ Author │ Public Speaker
R.S.A. Deasil Advisors, LLC
Office: 531-333-2745
Email: Deasil@rsadeasil.com
Website: www.rsadeasil.com
P.S. If you would like me to speak at your next event, please click HERE
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