10 reasons to switch to an online bank
Say goodbye to physical banks
If you’ve stuck with your bank branch, it might be time to throw it out on the street.
The number of online banks in the United States is increasing. And the number of consumers using branches has declined over time. According to a to study from JD Power, 29% of retail banking customers have not visited a branch in the past 12 months, up from 22% in 2015.
As the line between online banks and their traditional competitors begins to blur, digital financial institutions still offer unique advantages.
Here are 10 reasons why you should switch to an online bank.
Online banking is convenient
The convenience offered by online banks makes them attractive to consumers. As long as you can connect to the internet, you’ll be able to view your bank statements, pay your bills, and transfer funds at your own pace.
Dropping into a branch to make a deposit or fill out an application is something you can permanently remove from your to-do list. This is useful, especially if you are constantly on the go.
“Getting to a branch isn’t always the easiest thing to do on an otherwise busy day,” says Nicole Lorch, chief operating officer of First Internet Bank of Indiana and its parent company. “With the branch opening hours which are still a bit restrictive, it works just as well for them to do their banking transactions remotely.”
Compare rates now if you’re ready for a new checking or savings account. Before committing to an online bank, check out their website. Look for features like live chat that let you easily connect with reps when you have questions.
No need to change banks when you move
Once you’ve swapped your physical account for an account primarily available online, you may never have to switch banks again.
If your bank serves customers nationwide, you can keep your accounts even if you leave town.
“You don’t have to worry about switching banks if you change jobs or move across the country or whatever,” says Damian Dunn, founder of NextGen financial life planning, based in Auburn, Indiana. “Your money follows you everywhere.”
With a regional bank that only has local branches, keeping your account when you move might not be so easy.
“If you do business with smaller banks – like you know regional credit unions etc. – if you go outside their network, it could create significant issues in accessing your funds,” says Jeremy Walter, founder of Fident Financial, a fee-based investment advisory firm in Lancaster, Pennsylvania.
Find banks online with tools that make it easy to find ATMs when you’re in different cities. This is an important step to take in addition to reviewing products like loans and money market accounts.
Savers can get a higher return
Without the expense of running a branch network, online banks save money. This gives many of them the ability to offer savers better interest rates.
“Overall, online banks are simply able to pay a higher percentage rate on savings accounts than physical banks, simply because they have a lot less overhead,” says Walter. “They don’t pay leases or mortgages. So you see these savings rate returns are a bit higher than what I’ve seen from brick and mortar.
Comparator to access the most competitive rates on CDs and savings accounts. To make sure you’re getting a good deal, calculate the potential return on your investment.
“Some people move money around and don’t really do the math,” says Mark Wilson, president and founder of MILE Wealth Management in Irvine, California. “Is it worth going from one that gives them $20 a year to one that bumps it up to $30 a year?”
You will avoid high fees
Some physical banks have accounts with high fees. And waiving those fees isn’t always easy.
Switching to an online bank can completely eliminate this problem. Fewer operating costs can translate into lower fees.
“I recommend that most of my clients – whether they are millennials or even some older clients – opt for a bank account that is not going to earn them money, that will not have or low cost,” says Ben Brown, founder and CEO of the fee-based investment advisory firm Entelechy. “Generally, these will be online banks.”
Before switching to an online bank, read the terms and conditions to understand if there are any hidden fees or expectations related to savings and checking accounts.
They are usually technologically advanced
Online banks tend to cater to digitally savvy customers who crave innovation.
“In terms of technology, trying new things and adding new services, an online bank will be able to do that much more efficiently and with much more success than a traditional bank,” says Timothy Michael, associate professor of finance at University of Houston–Clear Lake.
Many traditional banks are bolstering their online and mobile product offerings. But online banks continue to advance in providing advanced tools and services.
“Even as brick and mortar adapts to more modern technology, it’s not like online banks stand still,” says Walter. “They are still progressing more and more.”
The reduction in overhead also gives online banks the opportunity to invest in cutting-edge products. But don’t assume that they are all at the same technological level.
If you want a great digital experience, don’t open a checking or savings account online without first visiting the banks’ websites and reviewing app reviews.
Online banks can help you achieve your financial goals
When you can access your accounts day and night, it’s often easier to set goals and track your progress toward them.
The ability to bank from anywhere is an advantage. On the other hand, not being able to physically enter a branch could be a useful barrier for those with a bad habit of dipping into their savings.
“(If) you don’t want to have immediate access to that money, it’s just another little hurdle to get you in there and sabotage yourself,” Dunn says. “If it’s online, it’s a little more difficult to access that money. You can access it obviously, but it’s another good way to set up a savings plan.
In addition to comparing CD and money market account rates, consider experimenting with the tools and calculators offered by many online banks before breaking away from your traditional bank.
Online banks make it easier to manage money
Online banks simplify money management. You can perform certain tasks seamlessly, like paying bills, when your accounts are mostly or all in one place.
If you’re in the process of choosing a bank to switch to, make sure it fits your lifestyle and meets your individual needs. Ease of use is key.
“I would be looking for the ability – from this home page – to be able to not only view your account balances, but also pay a bill, transfer money, send a person-to-person payment, without having to go to a special tab,” says Mark Schwanhausser, director of digital banking at Strategy and javelin research.
If you need multiple savings accounts for different purposes, choose an online bank that allows you to open a series of accounts at once that you can assign different names.
You could be more satisfied
Switching to a direct bank – a bank without branches – could actually make you happier, according to new research from JD Power U.S. Retail Banking Satisfaction Survey.
On a 1,000 point scale, JD Power found that the overall satisfaction of direct banking customers (865 points) is higher than that of retail bank branch users (824 points) and retail bank non-branch users. detail (797 points).
However, an online-only experience isn’t for everyone.
If you always like to meet a teller face to face, find a bank that offers this kind of service with a branch nearby. Or find an advisor who can help with some of your financial concerns.
You can always get great customer service
You can still benefit from quality service even if you choose a branchless bank.
“It will be more critical for them – for a purely online bank – to have the best customer service known to mankind,” says Michael, an associate professor of finance.
As digital financial institutions, they can easily collect data and make changes according to customers’ wishes.
“From the moment someone visits our website to look at products and services to learn more about First Internet Bank, we are able to take all of that data and really use it to make our decisions,” First Internet Bank of Indiana’s Lorch said. “Because we’re able to really track the customer journey, we’re able to take that information and reuse it to create a better experience.”
Look at the package that an online bank can provide. Check out its high yield savings rates, loan rates and features.
Online banks are environmentally friendly
Are you trying to reduce your carbon footprint? This is another reason to switch to an online bank.
Physical banks tend to use a lot of resources compared to online banks.
“All digital generally means a lot less paper,” says John Buran, president and CEO of Rinse Bank. His bank’s new online division, BankPurely, plants a tree in New York State for every verified email sign-up and every new account opened.
In addition to saving paper, online banking consumes less energy overall.
“You save on lighting. You save on air conditioning,” says John Stewart, chief of staff at Flushing Bank. “All those little costs that add up when you’re trying to serve customers in a branch network.”
Going with an online bank to help protect the environment might be a good decision. Be sure to look for a Federal Deposit Insurance Corp member bank. You will want your deposits to be safe if your bank fails.
