Online banking is a popular alternative to handling your financial affairs in person. Approximately 1.9 billion people worldwide use online banking services regularly. Although you may be hesitant to make the switch to managing your accounts digitally, there are plenty of benefits to managing your finances online.
Find out which myths about online banking you can disregard and why switching to online accounts offers advantages.
What are Online Banks?
Online banks are institutions that allow you to make financial transactions virtually on the internet. You can set up all the same accounts offered by physical banks at a digital bank, including savings, checking, investment accounts, and lines of credit for loans. They have a diverse range of services, similar to and rivaling many brick-and-mortar traditional banks.
Many traditional banks also offer some form of online banking to their customers. They provide a website or app you can use to log in or make a mobile check deposit.
What’s the Difference between Traditional and Online Banking?
The difference between the two is in the delivery of their services. You can take your documents and walk into a brick-and-mortar traditional bank or take your business to a virtual institution from the comfort of your home (or anywhere you can get an internet connection).
While some people may prefer dealing with a customer service representative or financial advisor face-to-face, online banking provides you the freedom to access your accounts anywhere at any time.
Many people have reservations about banking strictly online, stemming from problems that occurred more than a decade ago. At the time, there may have been security breaches, mobile banking using bulky, complicated technology, and hidden fees that led to these common myths.
Find out which ideas about online banking aren’t true and why it’s safer and easier than you think.
Myth #1: Online banking is not safe
A common concern around mobile banking is the safety of your personal information. But if you’re worried about identity theft, today’s online banks have protocols in place for your protection.
Equipped with robust encryption coding and privacy practices, digital banks work hard to ensure your private data is secure. Digital banks have fraud protections in place for your debit and credit cards. If suspicious activity occurs, they can immediately freeze your account to prevent further transactions.
You can also take measures to protect your information when banking online. For example, don’t bank on a public Wi-Fi network connection or a public computer. Always log out of the website and exit your browser after completing your banking online.
Myth #2: Online banking is complicated
You don’t have to be a tech wizard to bank online. Mobile banking apps are tested and user-friendly, making it easy to deposit funds or send an e-transfer. With simple online portals and customer service to help, you can access your account information, bank number, and routing numbers and check your bank balance instantly.
Online banking doesn’t have to be complicated. Once you understand your institution’s user interface, it becomes more convenient than visiting a bank in person.
Myth #3: Online banks charge more fees
You may be concerned that having an account online will result in additional fees. However, digital banks can save money by not having physical bank branches. They don’t have to hire employees to run each branch, pay to build or lease the building, and they pass these savings on to their digital bank customers by charging less.
Myth #4: Online banks pay less in interest
Online banks are also highly competitive when it comes to paying interest on your account. Due to lower costs than a physical bank, digital banks can maintain the average marketplace interest rate.
The national average interest in 2021 was around 0.06% for savings accounts at large Federal banks, while online banking accounts earn interest up to three times higher. Varo is a digital bank that offers APY up to 3% and no hidden fees or minimum balance.
Don’t Believe the Myths
Fears about online banking are common before you open an account online, but the convenience of banking from a mobile app comes at low risk. Your personal information is safe thanks to strict security protections your bank puts in place and the constant monitoring of your account activity for fraud. In many cases, switching to banking online can even save you money and increase the amount of interest you’re earning.
If you need support switching bank accounts, resources from Finance is us can help by providing educational resources on banking, loans, and more.
Disclaimer: All content on this site is information of a general nature and does not address the circumstances of any particular entity or individual, nor is the information a substitute for professional financial advice and services.