We live in an age where most everything can be done from the palm of your hand, from purchasing movie tickets to buying groceries and having them delivered right to your home. This is no different for banking, causing a shift in focus to online banks. Online banks ditch the brick-and-mortar banking experience, but they do offer everything esle that most traditional banks do. While they do not offer live assistance in a face-to-face environment, they do offer assistance over the phone.
Reasons to Start an Online Bank
- Convenience: Direct banks are open for business anywhere there is an internet connection. Other than times when website maintenance is being done, they are open 24 hours a day, 365 days a year. If internet service is not available, customer service is normally provided around the clock via telephone. Real-time account balances and information are available at the touch of a few buttons. This makes banking faster, easier, more efficient and even more effective because consumers are able to always stay on top of their account balances.
Updating and maintaining a direct account is also easier. It takes only minutes to change your mailing address, order additional checks and check for current interest rates.
- Better Rates: The lack of significant infrastructure and overhead costs allow direct banks to pay higher interest rates on savings and charge lower mortgage and loan rates. Some offer high-yield checking accounts, high-yield CDs and no-penalty CDs for early withdrawal. Some accounts can be opened with no minimum deposits and carry no minimum balance or service fees. (To learn how to choose a bank that won't charge you unnecessary fees, check out Choose To Beat The Banks.)
- Services: Direct banks typically have more robust websites that offer a comprehensive set of features that may not be found on the websites of traditional banks. These include functional budgeting and forecasting tools, financial planning capabilities, investment analysis tools, loan calculators and equity trading platforms. They also offer free online bill paying, online tax forms and tax preparation.
- Mobility: Online banking now includes mobile capabilities. New applications are continually being created to expand and improve this capability on smartphones and other mobile devices.
- Transfers: Accounts can be automatically funded from a traditional bank account via electronic transfer. Most direct banks offer unlimited transfers at no cost, including those destined for outside financial institutions. They will also accept direct deposits and withdrawals that you authorize, such as payroll deposits and automatic bill payment.
- Ease of Use: Online accounts are easy to set up and require no more information than a traditional bank account. Many offer the option of inputting your data online or downloading the forms and mailing them in. If you run into a problem, you have the option of calling or emailing the bank directly. One advantage of using online checks is that the payee's information is retained, which eliminates having to reenter information on subsequent checks to the same payee.