Believe it or not, the roots of online banking stretch back to the 1980s. According to historical records, Bank of Scotland offered a service called Homelink in 1983 that allowed people to pay bills and transfer money via the internet. At that time, you could only hook up to the ‘net by using a landline telephone or a TV.
We’ve come a long way since then, to the point where online-only banks like Bank5 Connect have made noticeable inroads in the banking world. Not having to go to a physical location to conduct your banking transactions is becoming more the norm than ever before.
So what in particular has motivated millions to go this route?
Convenience and flexibility. There’s no longer a need to get dressed, drive to the nearest branch, and wait in a teller line to deposit money into your account. With an online bank, you can use a mobile app to snap a photo of your check, even if you’re lying in bed in your pajamas! Plus, you don’t have to wait until a bank branch is open to conduct transactions or to check on your account activity. You can do that, and more, practically any time of day using a laptop, desktop, smartphone or tablet. It’s banking on your terms, where and when you want to do it.
Insured deposits. Most, if not all, online-only banks are insured by the FDIC. This means that deposit accounts at FDIC member online-only banks are covered in the same manner as accounts at their brick-and-mortar counterparts. FDIC insurance protects each customer’s deposits, up to $250,000 per financial institution. However, it’s possible for you protect all of your deposits, even in excess of FDIC limits. One way to accomplish this is to open an account at a Massachusetts-based online bank, like Bank5 Connect, that offers DIF insurance in addition to FDIC coverage. DIF (the Depositors Insurance Fund) insures any deposits above the FDIC limit.
Lower fees, higher interest rates. Because online-only banks typically have lower costs (as in no physical branches to maintain), they can pass their savings on to their customers. Fees are generally lower and interest rates on deposits are generally higher with an online-only bank than with a brick-and-mortar institution.
Some people are hesitant to move their money from a brick-and-mortar bank to an online-only bank due to the fact that they’ll have less direct contact with the bank and its employees. There can be a concern about not being able to walk into a branch and speak with someone when something goes wrong with an account. In order to alleviate this fear, it’s important to choose an online bank that offers strong customer support like extended phone support hours or a live chat feature. It’s also a good idea to read some reviews from actual customers to get a sense of what call center hold times might be like, or how satisfied customers are with their overall ability to reach the bank.
Another common reservation people have about online-only banks is a fear about not being able to easily access their money. If you decide to go with an online bank that has no physical branches or dedicated ATMs, how will you make a cash withdrawal? To ensure you’ll have ample opportunity to withdraw your money as needed, you should thoroughly research the bank’s ATM policy. Some online banks are part of a national ATM network, meaning you can use any ATM in that network without incurring fees. Others will reimburse you for ATM fees. Bank5 Connect offers a mix of both. Bank5 Connect is part of the SUM ATM Network which is comprised of thousands of ATMs across the United States. In addition, Bank5 Connect will never charge its customers for using an ATM outside of the SUM Network, and will reimburse other banks’ surcharges up to $15 per statement cycle.
If the perks of online-only banking align with your lifestyle, it might be time to make the switch and find an online bank that best suits your needs. Just be prepared to spend more time in your pajamas!