The Positives and Negatives of Online Banking

Source: Thinkstock
Source: Thinkstock

Online banking has become a popular way to manage and keep track of money, and there are many positives and negatives to online banking. Some consumers are tired of all the changes that affect bank branches, including the fact that many banks are now getting rid of free checking. Of course, online banking isn’t immune to the many of the same issues that customers face with local banks or bank branches. Many banks now offer online banking, so if you bank with a national chain, your bank probably already has online banking. However, strictly online banks don’t have to pay rent or pay people to answer the phones or help customers, which helps cut costs. This isn’t to say that the best banks are those that only offer online banking, although that is an option. There are positives and negatives to online banking, whether the bank also has local branches or not.

According to the FDIC, if you are considering online banking, you need to take a few steps to make sure that you are trusting a reliable site. First, be sure that the online banking is legitimate and that your deposits are insured. Regardless of whether you are choosing a bank that also has physical offices or you are choosing a bank that only offers online banking, make sure you are using a legitimate site and not a phishing site or a fake bank. Look for the FDIC logo or statement saying that the bank is insured; you can also check if the bank is insured here.

There are many positives to online banking. Often, online banks have better interest rates, and also mortgage rates. Another advantage is that you can check on your account balance very quickly, and it doesn’t matter what time you log on. You can also transfer money at any time of the day, and usually if you transfer money between accounts, you can see the change immediately. You also have the advantage of opting out of paper statements if you want to; this can be done regardless of whether or not your bank has a branch office.

It can be beneficial to get your statements immediately online, and canceling paper statements also lessens the chance that someone could get a hold of your private information through mail fraud. Some banks charge fees for customers who want to maintain their paper statements as well, and having an online account can help you reduce your fees in general.

If a concern arises regarding identity theft, you can monitor your account yourself much easier than if you had to go into a branch office whenever you wanted to check your balance. Many banks also offer the option to set up alerts, so that you will quickly know if something is wrong in your account. This is also particularly helpful if you are out of the country, or even in a state without your bank, because you can go online and see if there is an issue quickly instead of having to track down an office. Also, many banks have associated applications that help you handle banking on your phone or other device, and online banking allows you to pay your bills electronically.

There are also negatives to online banking. Some people enjoy working with tellers face-to-face. Local banks also often employ staff that get to know their regular customers, which for some people is a very welcome tradition. Online banks employ call center representatives, but speaking to a person on the phone isn’t the same as talking to them when you are in the same room.

Another issue with online banking is that if you need to deposit or withdraw money quickly, you will have a harder time doing so. Usually you have to mail in your deposits or wait for a withdrawal to come to you — you can’t just go down to the bank. One exception is if you use online banking but you also have a branch office that is part of the same bank, but that won’t be the case if you choose a strictly online bank. If you have to fill out any other paperwork, that can take time too, and you will probably have to mail it in. Even if your bank accepts faxes, some people are not comfortable faxing private information.

If you have a problem that needs immediate attention, like identity theft (which is a growing problem), you may face long wait times in order to speak to someone. Even if you just have a quick question, waiting on hold rather than speaking to someone at a bank branch can be frustrating. Depending on the bank, you also might have to navigate a phone system designed to have you work with an automated recording instead of a person.

As mentioned before, you need to make sure that your bank is secure. Even if you know for sure that you are using a legitimate bank, online banks are open to security threats and breaches in a different way than branch offices. Legitimate banks will have security measures in place to protect your information, but problems can still arise. Even if your bank isn’t the problem, if someone obtains your log-in information (which can happen via an email), they can do some real damage. There’s also the chance that the website could go down, and if you are in a hurry, that can be a big problem.

The decision is up to you; there are many advantages to online banking, but there are also disadvantages. If possible, you might want to choose a bank that offers online banking but also has a branch office near you. That way if a pressing matter comes up, you can still go in to the office.

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