6 things to look for in your online banking – Forbes Advisor
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Online banking is one of the biggest trends in the financial services industry, and not just the usual online banking services of traditional banks that allow you to access your account information online.
If you are looking for an online banking relationship, there are several different categories and definitions that fall under this umbrella, including:
- Online-only banks or digital banks that offer traditional banking products and services, but in an online format
- Fintech startups, also known as challenger banks or “neobanks”, which deliver financial services in new and innovative ways to a public of tech-savvy consumers
Some online banks offer unique financial management tools, often in the form of apps, that provide fun new ways to help you save money or manage your monthly budget. Other online banks don’t offer fancy gimmicks but will give you a better place to park your savings i.e. they pay higher APYs.
Depending on your financial needs and banking goals, there are different online banking solutions that can help you deposit your paycheck, access your money, save money, borrow money, and invest for the future.
Before signing up with an online bank, consider this list of key characteristics to look for in a financial services company. Many of the same things you would want in a physical bank should also be on your checklist when evaluating online banks.
1. FDIC insurance
The Federal Deposit Insurance Corporation (FDIC) helps insure people’s deposit accounts (checks, savings, money market accounts, and CDs) against bank failures, protecting you up to $ 250,000 per depositor, per category of property, in FDIC member institutions.
Banks and savings banks are covered by the FDIC; credit unions enjoy similar protection provided by the NCUA. Most online banks are FDIC insured and where applicable they will highlight this information on their websites (“FDIC Member”). But before you deposit any money, check the fine print to make sure your online bank account is FDIC protected using its BankFind tool. It is your responsibility to make sure your bank is FDIC insured.
2. Lots of toll free ATMs
Everyone hates paying ATM fees. But even if you do banking with an online bank, that doesn’t mean you should be doing without cash. Most of the best online banks offer access to extensive ATM networks, often without charging you an ATM fee to withdraw money from your account. For example, Ally Bank offers access to 55,000 Allpoint ATMs, and Carillon offers access to a network of over 38,000 free ATMs.
Other online banks may not offer ATM access, especially if your account is an online savings account. For example, American Express Personal Savings does not provide ATM cards or debit cards. Think carefully about your goals for using your online banking and decide which features are most important to you. Do you want to be able to use your online bank account for everyday expenses and access cash, or do you just want a place to put your savings to earn a higher APY?
3. High yield savings accounts
Online banks don’t have the infrastructure and overhead of traditional banks. As a result, online savings accounts can generally afford to offer higher returns on cash savings than traditional banks. For example, in December 2020, some of the best online savings accounts were offering APY rates ranging from 0.40% to 0.81% APY.
Be sure to shop around before choosing an online savings account. Not all online banks can offer the same functionality for your account. For example, if you want to have an ATM or debit card for your account, some of the more profitable accounts may not offer this option.
Also, make sure you understand the rules and requirements of your account in order to get the best APY rate. Some high yield savings accounts will require a higher minimum deposit to open the account, a continuous automatic monthly deposit to be made to the account, or a minimum balance to be maintained in the account.
4. Multiple banking products
Many people have specific financial goals that make them want to open an online bank account, such as getting a higher rate on their savings accounts. If you just want to focus on one aspect of online banking and leave the rest of your money in a traditional bank, that’s fine.
But many online banks offer a greater variety of options for banking products and services. Don’t assume that online banking is all about savings accounts. Some of the best online banks are expanding their offerings to include checking accounts, bank or debit cards, certificates of deposit, money market accounts, credit cards, foreign exchange transactions, loans, and other financial services.
5. Useful financial management tools
One of the main selling points of fintech apps and online banking is that they tend to offer innovative tools and features to help people manage their money. There are several money-saving fintech apps, including bundling apps, which offer specific ways to help their users save more money, such as:
- Tassels. This savings app rounds up the currency of your daily purchases and then invests that money in low cost index funds. There are a variety of savings and investing programs available for a monthly fee of as little as $ 1 per month.
- Carillon. This mobile banking app offers two automatic savings features: Round Up (where daily purchases are rounded up to the next dollar, with the remaining currency deposited into your Chime savings account) and Save When I Get Paid (members can s ‘register to automatically deposit 10% of their salary in savings).
- Capital city. This app helps you save for specific goals, such as a vacation or a new car, based on your own customizable rules based on your behavioral motivations. You can use Qapital to ’round up’ daily purchases or create a personal savings rule such as ‘save a certain amount of money every time you walk a mile’.
- Figure. This app lets you “save money without thinking about it” by using complex algorithms to analyze your spending habits throughout the month and automatically save the perfect amount every day. You can use Digit to set savings goals or pay off debt.
- Qoins. This is another roundup app that aims to help people get out of debt faster by sending automated supplemental debt payments (in addition to your regular monthly debt payments), with a focus on debts credit card and student loan.
Many of these fintech apps also offer online banking services such as debit cards and checking accounts, or gradually introduce new banking services as they grow and strengthen their customer base. For example, there is an application called “Dave”(Tagline: Bank for humansMT) which started out by offering a very specific service: it helps people avoid overdraft fees.
Dave’s clients sign up (for a monthly fee of $ 1) to have the app monitor their checking accounts and, if they appear to be about to overdraw their account, the app will advance $ 75 to fill. the void.
But Dave doesn’t stop there. The company recently started offering its own banking services, including a no-minimum checking account that charges no overdraft fees. You may find that a fun and quirky fintech app that you first downloaded to help you with a particular financial problem gradually becomes a full-service online banking.
The evolution of fintech apps like Dave is an example of how in the world of online banking you don’t have to go to the bank; sometimes the bank comes to you.
6. Investment aid
Another form of online financial service that has become more prevalent in recent years is online investment management, also known as robo-advisors. Companies like Improvement and Wealthfront use AI technology (this is where the “robot” part comes in) to help manage client investments and help people invest in a balanced portfolio of stocks and bonds based. their financial goals and risk tolerance.
You can use robo-advisers to help you save and invest for retirement, or to get better returns on your short-term savings than you might get from a conventional bank.
Some robo-advisors have also started offering savings accounts, which can (depending on the company and type of account) be FDIC insured and can allow you to invest in low-risk assets like bonds. quality business that tend to pay higher returns than traditional online savings accounts.
Of course, be sure to read the fine print, clarify your investment goals, and understand your tolerance for investment risk and time horizon before signing up for an investment management plan. But if you’re feeling frustrated with low-yielding savings accounts or high investment management fees, and want to try something new, robo-advisers can be a good solution to help you manage your investments. with the power of technology.
The world of online banking is changing rapidly and the lines between fintech applications and full-service banking are blurring. The good news for consumers is this: You have more choices than ever before and more and more businesses are competing for your banking business. This could mean using an app to save money on daily purchases or avoiding overdrafts, or signing up for a more elaborate financial management platform that can help you pay your bills, save for the future, and to invest in stocks and bonds.
Online banking and fintech applications are becoming a more important part of the lives of millions of Americans. As always, no matter what you choose for your online banking, be sure to read the fine print, understand the possible fees, limits and risks, and try to make an informed decision to align with your financial goals. global.