Having an online bank account is a terrific alternative to a traditional bank if you want low-cost and convenient digital banking.
Still, online banks have their advantages and disadvantages.
There are many options. Many of the best choices available offer minimal fees, intuitive mobile apps, and ultimately a safe place to keep and protect your money with deposits that are federal insurance backed.
What are Online Banks?
By definition, online banking refers to using a computer or mobile device to manage your money.
While brick and mortar banks and credit unions have branches that will let you access your accounts over the internet, an online bank generally provides mobile access anytime with smartphones or computers.
The Pros of Online Checking Accounts
Suppose you think of opening an online checking account instead of having a more conventional bank account with a national or local branch. In that case, there are some enticing strong points to consider:
- Well-designed technology with simple, easy to use mobile apps and websites complete regular tasks like paying bills.
- The ability to open an account through the bank’s app or visit their website—thereby eliminating the need to visit a physical location.
- Account management with online banks is subject to far fewer fees (sometimes no monthly fees at all) than traditional banks would charge due to lower overhead.
- Access to your account anytime you need.
The Cons of Online Checking Accounts
Secure online banking doesn’t come without some drawbacks, but whether these cons outweigh the benefits depends on your comfortability with what it entails:
- It can be difficult or impossible with some online banking options to deposit cash. Some options allow for cash deposits by working with ATM networks, but some providers only make deposits possible with mobile checks, electronic bank transfers from other accounts, or direct deposits.
- There is no in-person customer service for problem resolve or guidance.
- Must wait for postal delivery of official checks.
- Some may require customers to have another account with a legitimate institution.
How to Manage Cash with an Online Account
Although having funds in an online account is convenient, there will be times when you need physical funds.
Let’s say you have some hard cash you need to deposit, or you need to get your hands on money to hand off to someone else. You’re probably wondering how to withdraw and deposit cash from your online checking account.
These are a few common ways to access cash:
Cashback or ATMs
There are fee-free ATMs that are ubiquitous and easily accessible for withdrawals, but there is generally a daily withdrawal limit set by the online banking provider.
Cashback is another viable option available to customers in pharmacies, grocery, and convenience stores. Usually, there is no fee to request cash back when making your everyday purchases, but it is minimal if a store charges a fee.
Cash Advance
For withdrawals of more massive amounts, you could get an over-the-counter cash withdrawal from participating banks in your area.
While there is a daily limit for taking money out of your account via this method, it is significantly higher than with an ATM.
Cashier’s Check or Money Orders
Many online banking providers can mail you a cashier’s check as another way to pay someone who will not accept a personal check. If you don’t want to use cash, you can use these or get a USPS money order with your debit card at all U.S. Post Offices.
You have a few options for depositing funds into your account as well:
Mobile Check Deposit
With the use of the online bank’s mobile app, you can quickly and effortlessly take a photo of your check for deposit into your account.
Deposit a Money Order
If you are handling cash and wish to get the money into your online checking account, your provider may accept a money order for an electronic mobile deposit as it would a check.
ATMs
A majority of online banking services do not provide the ability to deposit cash using an ATM. However, a small few do, but it can be an excellent option if the provider you choose works with a network of ATMs that accept cash deposits.
How to Deposit a Check
With online banking, you have the added convenience of depositing checks to add money to your account. If banking through a website, banks may allow you to scan copies of your check.
If using the bank’s mobile app, you can take a snapshot of the check to complete the electronic deposit. The policies may vary between banks, but the process is, in most cases, the same. To deposit a check with your phone, follow these steps:
- Make sure your phone meets the requirements and that your bank supports it.
- Enroll in your provider’s program to use online banking and mobile deposits.
- Sign the check and print your account or member number if instructed by your provider.
- Sign in to your account within the app.
- Look for mobile deposit in your options or tools.
- Take a clear picture of the full front and back of the check.
- Verify the deposit amount.
- Submit and wait for the deposit, which could be instantly or a day or two.
- After confirming the deposit of funds, you may void the check.
Website Vs. App: Which Is Better?
Online banking has been available for quite a few years, and mobile banking arrived as a technological answer to bank customers’ demanding needs. The two are similar, so understandably many people think they are the same.
However, despite the widespread public assumption, the two are distinctly different. Although banks that offer online banking are making their websites more responsive for phones, mobile banking is typically associated with mobile apps.
Online banking
- Customers can perform financial transactions, such as pay bills or transfer funds on the bank’s secure website.
- The bank could exist solely online or have physical branch locations.
- Users register with the bank and create an I.D. and password for logging in.
- Users can apply for credit cards or loans.
- Customers also can print statements and check balances at any time.
Mobile Banking
- Customers can use a mobile banking app.
- Users can opt-in for SMS text banking.
- Customers can make mobile bank deposits, transfer money, and pay bills.
- Users can locate nearby ATMs.
Is Business Banking Possible?
Opening a business bank account is one of the essential steps to starting and running a business. Although vital, the process can be quite cumbersome.
Fortunately, thanks to industry demand for better options to offer business owners to manage their business finance better, opening a business account is much more comfortable.
The best online banks for business banking have lessened the labor-intensive processes involved with opening an online business checking account.
Specific requirements nowadays may vary depending on the type of business entity. At the very least, you need personal identification, the articles of incorporation or a DBA certificate, and general information about the business.
How to Choose an Online Bank
When choosing an online bank, you want to make sure that you get one that has all the features you want. It’s essential to assess how you spend and save your money beforehand. You may want to consider some of the following:
- Are there any banking fees?
- How much interest can you earn?
- How available is customer support? Is there secure messaging, live chat, and phone support accessible at convenient times for you?
- Are the bank’s website and mobile app easy to navigate and understand?
- Is the bank Federal Deposit Insurance Corp. (FDIC) insured? If there is a bank error, the federal insurance will cover your deposits for up to $250,000 per account user.
- Will you be in an ATM network that is fee-free? Or does the bank offer an ATM rebate each month?
- Can you opt-in for SMS text banking?
- What unique and useful features does the bank offer? Are there any tools the bank has to help with budgeting?
What are the Best Online Checking Accounts?
Our top five picks for online banking include the following, in no particular order:
- Chime (best for automated savings tools and early direct deposit access)
- Capital One 360 Checking (best for superior customer support and flexible overdraft options)
- Ally Bank (best for ATM fee reimbursement and no minimum balance requirement)
- Radius Bank (best for business banking and free rewards checking)
- Simple Checking and Budgeting (best for more than 40,000 surcharge-free ATMs and no overdraft fees)
So, are they worth the hype? The bottom line is what will best suit your needs. Online banking providers are not ideal for a lot of dealings with cash.
It might not be the best choice for you to completely break away from traditional banks if you earn most of your income in cash.
Nevertheless, there are still some decent benefits to using online banks. So, if you are considering a partial or complete shift, make sure you shop around and find a provider that works for your lifestyle and money management habits.