Pros and Cons of Internet Banks

Remember "way back when?" When almost everything we needed was limited by what was available in the local community?

  • Need information on current affairs? Read a newspaper.
  • Want to buy the latest electronic wonder? Go to a local store.
  • Need to open a checking account? Visit a bank that's conveniently located.

For better or for worse, those scenarios have changed so dramatically that the idea of limiting choices to what's only available in the surrounding few square miles is almost laughable. While internet-only banking may not be at the forefront of the web marketplace, it's expanding every day and strengthening its position.

If you're thinking of making the move to an internet-only bank, have you considered the "Pros and Cons?" In other words, does an internet-only bank make sense for your life? Like everything else in life, the determinant factors come down to time and money: will an internet-only bank be convenient and flexible enough for my lifestyle, and will it improve my financial life?

The following list is not meant as a checklist to definitively determine whether an internet-only bank is right for you, but as a list of items that needs to be considered when investigating the advisability of using an internet-only bank.

The Good

  1. Higher Savings and Deposit Rates – With no physical branches, overhead is dramatically reduced and those cost savings can be passed along to the customer.
  2. Lower Fees – Fees are typically drastically lower or even non-existent with most internet-only banks, another beneficial advantage of their lower overhead and reduced operating costs.
  3. Online Bill Pay – No more panic attacks because you forgot to mail the car payment that's due today.
  4. Account Management – Everything you need to know about your accounts is available with a few clicks. Beyond the basics of account management (balances, outstanding checks, specific paper statements or documents, etc.), many internet-only banks provide a variety of online tools that can paint a very clear picture of your financial history.
  5. 24/7 Availability – The web is there 24/7, and should you not have internet access, telephone customer service is usually available.

The Not-So-Good

  1. Depositing Checks – Some internet-only banks allow checks to be deposited via a Smart Phone, and it is likely this feature will become more prevalent. For those other cases, though, the only other option at this point is to mail the checks, which will significantly slow down the clearing process.
  2. Access to Cash – If you need cash, where do you get it? ATMs are an obvious source, but ATM fees can offset the savings you gain with internet-only banking in some cases (though a number of internet-only banks waive these fees). Many grocery stores and the U.S. Post Office will give up to $50 cash back if a debit card is used to pay for purchases.
  3. Depositing Cash – If you need to deposit cash, the only current recourse is mailing the cash. If you frequently deposit cash, this could be problematic.
  4. Dependency upon Internet Access – If you don't have access, you can usually find somewhere nearby that has internet access, but what do you do if you have a pressing need or if the bank's website is unavailable? Emergency contingencies need to be thought out in advance.
  5. Your Computer – Technology is always moving forward, but your computer doesn't automatically match pace. It may be necessary to update your computer or its software to take advantage of internet banking.
  6. Security – Internet banking is a partnership, and the customer is the greater security risk of the two partners. Internet-only banks have amazingly complex security systems to thwart hackers; the average customer doesn't.
  7. Personal Touch – Should a problem with your account arise, there is no "personal touch" service. You will be dealing with often-helpful phone trees, "Live Chat," and Customer Service Representatives who know their jobs, but who don't know you.

Both internet-only banks and traditional brick-and-mortar banks have their own unique advantages and disadvantages. Use the above information to help you determine a good course of action for you.

1 Beef up your savings with higher cd, checking, and savings account rates.
2 Simplify your banking experience with industry-leading tools & features.
3 Reduce or eliminate those pesky account fees that sap your savings.
4 Enjoy the convenience of 24/7 availability and top-notch customer service.