4 reasons to switch to online banking

The concept of “going to the bank” is becoming a relic of the pre-pandemic world.

A new GOBankingRates survey of 1,000 adults showed that 4 out of 5 prefer to bank online via a web browser or mobile app.

Checkout: GOBankingRates’ Best Online and Neobank Savings Accounts for 2023
See also: Best Online Banks 2023 from GOBankingRates
Discover: Why 1 in 5 Americans Are Considering Switching Banks

Approximately one in three people still maintain an account at a major national bank, but web-based alternatives are rapidly gaining market share. In fact, more than 1 in 5 of them switch to a financial institution that has no branches or buildings in the real world and exists purely on screen. But should you?

Trinity Owen, Founder and Chief Financial Officer of The Pay at Home Parent, said: “For many people, the default choice is a traditional brick-and-mortar bank. But online-only banks are becoming an increasingly popular alternative, and for good reason.”

Digital competitors have lured millions of customers from big banks with the promise of a more convenient and cost-effective banking experience.

Lower overhead costs mean higher rates and higher yields

It costs a lot of money to keep a physical branch operating. Money that online banks don’t spend on buildings, personnel and vaults can be returned to their customers.

Take our survey: How much signup bonus do you need to change banks?

“One of the biggest advantages of online-only banks is the higher interest rates on savings accounts and other savings products,” says Owen. “With no overhead associated with maintaining a physical branch, we can afford to pass the savings on to our customers in the form of higher interest rates.”

story continues

For example, Ally Bank currently pays savings account holders an APY of 3.3%. That’s ten times her national average. Such yields are particularly generous when compared to some of the larger traditional banks: 0.15% at Wells Fargo and just 0.01% at Bank of America and Chase.

Allies are not outliers. The online financial institution dominated the latest Forbes and Time lists of banks with the highest yielding savings accounts in 2023.

Online alternatives ditched fees that made big banks notorious

Online banks have gained loyal followings by withholding a set of widely hated fees that brick-and-mortar banks are notorious for charging their customers.

“In addition to better interest rates, online-only banks often offer lower fees than traditional banks,” Owen said. “For example, many online-only banks do not charge monthly maintenance fees or ATM usage fees. there is potential.”

Using the same example as before, Wells Fargo and Chase cost $5/month and BOA $8/month, while Ally has zero monthly maintenance fees. But traditional banks aren’t the only way to nibble on your cash. Online banks are much less likely to charge overdraft fees, minimum balance fees, insufficient funds fees, returned check fees, etc.

Besides, online banks are less likely to set minimum deposit requirements than brick-and-mortar banks. Most of the top high-yielding online banks do not have minimum deposit requirements to join or minimum account balances required to get the 4% or more outrageous yields.

Online banks tend to have better technology and tools

Inevitably, online banks have had to find ways to pack everything from branch drop boxes to tellers into their apps and technology. As a result, web-based banks tend to have a more robust, reliable, and intuitive digital infrastructure than brick-and-mortar banks.

“Another advantage of online-only banks is that they typically offer more advanced and easier-to-use digital banking tools,” says Owen. “In addition, online-only banks often offer budgeting and savings tools to help you stay on top of your finances.”

The most common concerns are rarely justified

Physical branches with smiling tellers and giant safes provide reassurance to traditional bank customers who can’t leave their money in a bank that doesn’t exist outside of a computer screen. One of the most common reasons for hesitation is security. After all, can you really trust your money with her banking online?

The answer is yes. The money you deposit with your online bank is insured by the FDIC, just like you queue up to deposit at your local branch.

Another important issue is ATMs. How can you get cash when you need it when you bank with a mobile app?

At an ATM, just like you bank with Chase, BOA, or Wells Fargo. Online banks, like traditional banks, have vast networks of money machines and are much more likely to refund at least some of the charges incurred using ATMs outside their network.

Finally, there is the threat of fraud. Online banks can be hacked.

Of course, so does the digital infrastructure of traditional large banks. According to CNET, online banks rely on the same security technologies that keep you safe when shopping online, reading email, and using brick-and-mortar banking apps. This includes two-factor authentication, data encryption, account monitoring, signature verification, and automatic logout.

Learn more about GOBankingRates

This article originally appeared on GOBankingRates.com: 4 Reasons to Switch to Online Banking