Online banks can provide considerable benefits, such as accounts with a competitive annual percentage yield (APY) and minimal or no maintenance fees or minimum balance restrictions. Online-only banks may also provide a large number of fee-free ATMs and a secure, user-friendly digital banking experience.
Some of the features you should look for in a bank that solely has an online presence are the same ones given by many brick-and-mortar banks, such as deposit insurance, which ensures your money is safe. However, because consumers of online banks do not have the option of visiting a branch to speak with a teller, features like conveniently available customer service may be quite important.
Examining a range of the benefits and services offered might assist you in locating the ideal online bank to fulfill your needs. Here is a list of the top things to look out for.
Competitive Pricing
Online banks often provide very competitive savings account rates, frequently paying 10 or more times the national average interest rate. Over time, the difference might mount up. For example, if you deposit $5,000 into an account with a 0.1% APY and leave the money alone for five years, you’ll finish up with $5,025.06. However, if you deposited $5,000 into an account with an APY of 1.15%, you’d have $5,295.92 after five years, which is $270.86 more than the account with the lesser return.
Because they don’t have the administrative costs of running branches, internet banks may afford to pay higher rates in some situations. Furthermore, having competitive rates may help attract clients away from traditional brick-and-mortar banks, which often offer lower APYs.
FDIC Insurance
The Federal Deposit Insurance Corporation (FDIC) insures people’s deposit accounts (checking, savings, money market, and CDs) against bank failure, up to $250,000 per depositor, per ownership type, at FDIC member banks.
Banks and savings organizations are insured by the FDIC, whereas credit unions are insured by the NCUA. Most internet banks are FDIC-insured, and if they are, this information will be clearly shown on their websites (“Member FDIC”). However, before you deposit money, use the FDIC’s BankFind tool to double-check the tiny print to ensure that your online bank account is FDIC-insured. It is your responsibility to guarantee that your bank is FDIC-insured.
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Strong ATM Networks
Online banks are frequently part of huge ATM networks, such as Allpoint and MoneyPass, which have 55,000 and 37,000 ATMs in the United States, respectively.
Online-only banks frequently do not charge ATM fees to their clients, and some may even reimburse fees you pay from other banks for using out-of-network ATMs. Depending on the bank, such reimbursements can be made after each business day or in a single sum at the end of a statement cycle.
Low Costs
When you have to pay monthly fees for your account, a competitive APY might suffer. However, many online-only banks do not impose monthly fees on their accounts.
Overdraft fees have been eliminated or reduced by banks in recent years, and many online banks no longer fee for things such as overdrafts, overdraft protection transfers, nonsufficient money, and returned products.
Customer Support Is Always Readily Available
Because online banks do not have branches, selecting one with easily accessible customer service may be advantageous. Some provide real-time support over the phone or through online chat 24 hours a day, seven days a week, while others allow you to send messages to bank employees via their mobile applications.
Digital Banking Made Simple
Many online-only banks provide user-friendly websites and mobile applications that allow you to move money between accounts, pay bills, deposit checks, and perform other things that you would normally do in a branch or an ATM.
Other online banking operations that may be feasible include creating new accounts, applying for a credit card, transferring money to others, and setting a stop payment on a check.
Various Banking Products Available
Many people desire an online bank account to achieve certain financial goals, such as earning a higher return on their deposit accounts. It’s OK if you only want to focus on one component of internet banking and leave the majority of your money in a traditional brick-and-mortar bank.
However, many internet banks provide a broader range of banking products and services. Don’t mistake internet banking with solely savings accounts. Checking accounts, ATM or debit cards, deposit certificates, money market accounts, card payments, currency transactions, loans, and other financial services are among some of the finest online banks.
Final Thoughts
Online-only banks may have certain significant benefits over traditional banks, such as the ability to provide greater rates and lower costs. Anyone looking for an online bank should examine things like APYs, digital banking experiences, ATM availability, and customer service quality.
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