Online Savings and Checking Accounts

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Online Savings and Checking Accounts

With the advent of the Internet came online accounts, where banks and credit unions offered online access to accounts and the ability to make certain transactions online. Today, millions of us take advantage of these accounts.

As well, there are some financial institutions that are online-only, meaning they do not have physical branches. They typically offer ATM cards, debit and/or credit cards, checking, and some of the more commonly used features of traditional accounts.

Online institutions are not for everyone. They have many advantages that have made them very popular, but they are outweighed by a number of disadvantages. Let’s look at them a little more.

Advantages

Interest rates. Online institutions are known for offering higher interest rates than brick-and-mortar ones. It is not a guarantee, but on average, online institutions can afford to pay higher interest rates because they have fewer costs—no tellers, no office to pay rent on, no utility bills, etc.

Fewer fees. Because online accounts are so much less expensive to maintain, they can charge you fewer fees.

Convenience. You don’t need to step out into the rain or snow to get to your account, nor do you have to drive several miles. Nor do you have to race to the branch before 5 o’clock to see your balance. You can do it all online or over the phone.

Disadvantages

Timing of deposits. When you want to deposit money into an online account, you must do so electronically or by mailing in a check. There will be a time lag as you wait for your funds to become available.

Fund accessibility. Getting your money via a traditional withdrawal can take days, meaning you have to wait for your money.

Fewer features. Saving money on overhead costs comes with its own price—there are fewer options with an online-only institution.

Customer service. There is something to be said for the human element, which is why many of us go to the teller at a brick-and-mortar institution. You can usually count on getting better problem resolution when the tellers know you. But with an online-only account, you can expect little or no customer support.

Technical difficulties. What if your online institution goes down and there’s no physical branch to go to? You’ll be out of luck, and the phone lines will be jammed with other concerned customers.

Many people reconcile the advantages and disadvantages of online accounts by using both of them, perhaps with an online institution and a traditional one, or by sticking with one institution and using both online and traditional access to it.