3 pitfalls of using an online bank
When it comes to opening a checking or savings account, you have a choice. You can use a physical bank or an online bank.
Online banks certainly have their advantages. For one thing, they don’t have the same amount of overhead as physical banks, so they can often offer better rates on savings accounts and certificates of deposit (CDs). And they tend to charge lower fees for the same reason. Plus, many online banks offer great customer service, in part to compensate for not giving you the same personal touch that physical banks do.
But if you are considering opening an online bank account, you might run into your share of hiccups. Here are three drawbacks you should be aware of.
1. Technological problems could prevent you from accessing your money
Websites crash all the time. But if your banking website is down when you need to make a transaction, you won’t have the option of just going to a branch and doing your banking in person instead. On the contrary, you will be at the mercy of the technicians responsible for solving the breakdowns and getting your bank’s site back up and running.
2. You cannot make cash deposits
You can go to a physical bank with a cash envelope and deposit that money into your account. This is not the case with an online banking. And that could be a problem if you tend to get your hands on a lot of money.
Suppose you have a side business like babysitting or dog walking where your clients frequently give you cash payments. Or let’s say you work as a waiter in a restaurant and receive most of your salary in cash tips. In these cases, an online bank probably won’t serve you very well.
3. You cannot use the peripheral services that you want
When you have an account in a physical bank, you often have access to a variety of services that can prove useful. For example, physical banks often have a notary whose services are free to account holders. Online banking doesn’t provide you with these side benefits, and while you may not need these services regularly, they can come in handy on occasion.
Is online banking right for you?
While there are many good reasons to use an online bank, you might run into some pitfalls if you alone open an account in an online bank and not in a physical bank. You may want to consider opening an online savings account or CD to take advantage of the best rates that online banks tend to offer. But you might also want to keep a separate checking account at a physical bank in your neighborhood (or other convenient location) that you can link your account to online. This will give you the best of both worlds and help you overcome the above limitations.