Money Management

The Advantages and Disadvantages of Online Banking

When the term online banking is used it can mean one of two things. The obvious term means that an individual (or company) can do their banking through the internet on any computer. This is often known as mobile banking. Registration is required and a password must be created. A relatively new system called verification or authentication creates an extra level of security. While takes an extra step, it helps the bank protect the security of your account and that is of paramount importance. After those formalities, a user has total access to the online site and can proceed to take care of most banking business. Established brick and mortar banks allow this access for a number of reasons but the two most obvious reasons are for the convenience of the customer and for a savings to the banking institution.

The bank has to have fewer customer service agents, or tellers. There are fewer lines in the actual bank and that makes everyone happy. Today, there is even a way to deposit checks online without having to actually go to the bank or an ATM.

There is no need, using this online system, to open any new accounts. A customer simply needs to go to the bank’s website, answer all relevant question, create a user name and password and they are ready and set to go. All further business can be done online. This method is truly a time saver. It also allows the customer to circumvent any hassle that might be lurking in a brick and mortar bank.

However, to some people the term mobile banking has a different meaning. During this century (beginning at the end of the 20th century) the banking industry has seen an interesting innovation. Online banking can actually occur with no brick and mortar bank attached, or available to customers. For the banking industry, this is a true money saving proposition. They don’t need to build a structure, or pay rent on an existing one. They need far fewer employees as well. They do need internet trouble shooters to help customers who are having technical difficulties available, usually 24/7.

With these cost savings, the bank can pass along higher interest rates to customers. This makes these internet only banks an attractive alternatives for many people. There are also some customers who prefer to open multiple accounts to save specific needs, or to save for special engagements, things or younger family members. Internet only banks make this multiple accounts situation extremely easy.

For those who need help to get online or to access their accounts, these banks have many customer service agents available either by online chat or on the phone. Another advantage of this banking system is that a customer can set up an arrangement that allows them to transfer money from one account to another with just a few clicks. It also means that if a customer gets their salary or benefits check directly deposited into a different bank, it also takes only a few quick clicks to transfer funds into one or multiple accounts with an internet bank.

Many people are happier to deal with internet banks than brick and mortar ones. Customer service is usually excellent, rates on savings are better and they offer better rates on things like mortgages. The best advice is to always look around for the best rates on savings accounts and loans of all sort.

An advantage of both types of bank accounts is that they are insured by the federal government. There is a branch of the United States government called the Federal Deposit Insurance Corporation. It insures accounts in commercial savings and loan banks. It is an independent branch of government and was created in 1933 to help consumers feel more trust in their banks after the Great Depression in the 1920s. If a bank is a member of the FDIC, deposits there are now covered up to $250,000. It does not cover things like stocks bonds and mutual funds. If a consumer has more than that amount on deposit, they should spread their money among a number of accounts. That is another way online and internet only banks can be of great help to depositors. This insurance also applies to certificates of deposit and retirement accounts.

There are banking customers who use a hybrid situation to cover all their banking needs. While most internet only services do not have brick and mortar ATMs and some people require cash, they Are comfortable splitting their business with a few banks, making sure that they always have one from which they can get cash or deposit cash. Internet only banks don’t handle cash. There are business people that usually have a good bit of cash, or even are employees that get paid in cash and need a place to deposit that cash. They often have accounts with brick and mortar banks for that reason. Some people just like to deal in cash, though that seems rarer these days. The solution for many people is to have a brick and mortar account with numerous automatic teller machines, while also using internet only accounts as well for better interest rates. This combination seems to work well for many people.

To sum up, there are many types of banks available to today’s consumers. The key here is mostly a convenience issue. What combination works for some people is a very individual thing. There are people who still do not trust internet only banks and prefer to do all their business with a brick and mortar bank. It seems that new branches of prominent banks are opening every day and everywhere. There are others who cannot be bothered with the hassle of driving (or walking) to a bank, deal with tellers, and other customers. These people prefer the internet only banks so that they can do all or most of their business online, even from their phones.

What you do depends on your style, so pick what works for you and remember that compound interest is always your friend!