Internet Banking: Should You Consider Online Banks For Your Savings?
Let’s start with a big question: should you consider internet banking or traditional banking? When you look at your options, you’ll be able to answer the question more easily by prioritizing on the banking services that are available from various financial institutions. I provide some things to consider when you shop for the right bank for your needs.
Consideration #1: Start out by coming up with a list of solid financial institutions that you’d like to take a closer look at.
The list should comprise of top online banks, traditional banks, credit unions and thrifts that you’d like to consider for your savings. For instance, here are some internet banks (with the best high yield savings accounts) for your review:
You should compare these to traditional banks such as Wells Fargo, Bank of America, PNC Bank, Chase Bank, Barclays, Deutsche Bank, etc. Note that a good number of traditional banks actually have their online banking divisions as well (e.g. HSBC), which function independently from their brick and mortar departments. Also look into credit unions and thrifts to see if they may have comparable products and services that will suit your needs.
Consideration #2: Find out which banking features are those you need and care about.
After identifying some bank candidates, you may want to identify which banking services are most important to you. Here are a few of what are currently offered at some institutions.
- Online bill pay
- Direct deposit
- Cool-looking checks
- A credit card as overdraft protection
- Competitive rates on savings accounts, money markets, and CDs
- Options on savings and checking accounts
- Multiple accounts for personal and business needs
- Customer service
Consideration #3: Check out the pros and cons of each of your banking options.
Typically, internet banks have some advantages over their traditional counterparts. Some of the benefits are:
- Convenience and the ability for customers to check up on their accounts without the need to wait on the phone for a reply.
- Savings on snail mail and paperwork. Why not go paperless? You can skip the paper statements and do your business online, saving you from paying any mailing fees.
- Lower fees on average. Internet banking can save you money on many services by virtue of providing you an online environment. Online banking generally provides customers a more efficient environment for conducting their activities.
- Higher interest rates. Just like with smaller banks, online banks are able to offer higher yields than their larger, brick and mortar, traditional counterparts. They’re able to set higher interest rates for their savings products due to a few factors: they can afford it based on lower operational costs and they may also want to increase demand by attracting more depositors with their more favorable rates.
Also, those who have had the chance to join a credit union or their local thrift may tell you that they’ve been much happier banking with these smaller institutions than with the familiar, large national banks that they used to do business with. Again, smaller thrifts and credit unions usually have much lower fees and are run differently from larger commercial banks. But they may not be as ubiquitous nor as technologically sophisticated as their competitors. For instance, if you need to use an ATM while on vacation somewhere, you may find it more challenging to find one that’s affiliated with your local credit union.
So which is the bank for you? It depends on what’s important to you. If you care about face to face service and a place to visit when you need to do your transactions, then a traditional bank is your choice. If you care about lower fees, higher returns and convenience, but don’t mind the lack of human interaction, then online banks are your thing. If you care about low fees and being part of a local institution that is run by its members, then a credit union is your pick. So choose wisely!