What Do I Need To Know About Online Banking?

Thanks to the wonders of online banking the Internet has opened up a world of options for your personal finances. When you are looking into online banking, it is important to remember that it is safe and it allows you unprecedented access to a variety of bank accounts.

Advantages of Online Banking

When you are looking to take on a new endeavour, you may make a list of pros and cons. The same could be useful when considering online banking.
There are several advantages of an online checking account:

  1. Online banks are more convenient because they do not have hours and do not take holidays
  2. You will always have access to your account. If a problem arises, you can get online at any time and take care of any issue
  3. Your transactions are done quickly, or at least quicker than business transacted at an ATM
  4. You can control all of your accounts from one Web site
  5. Established online banks, such as ING Direct, may offer higher rates and lower fees than traditional banks

The Drawbacks

As for cons, there are a couple--so let's take a look at them. Online banks are usually able to provide higher interest rates because they do not have the same overhead costs as a physical bank. A major cost for a physical bank includes the wages of personal bankers, tellers, etc. Since online banks don't have the same staff as a physical bank, it may take more time to do things like set-up your online bank account, add your spouse to an account, or get help with another issue.

Another drawback is more of a mental barrier. It may take a while for you to become accustomed to the system of an online bank account. However, this is similar to an adjustment you might have to make if you changed traditional banks. Additionally, you may wonder if an online bank account safe, or if you want to trade the convenience of an online account for the vulnerability of an online account? Although these are common concerns in the age of identity theft, online banking might be a safer option because transactions are digitally encrypted and the format of online banking requires less paperwork.

Online Options

Online banks offer most of the investment products that traditional banks offer. For instance, the money market account is available at online banks. High yield money market accounts are much like savings accounts, but a money market account will often pay a higher interest rate.

This higher interest rate comes with a catch: most money market accounts have restrictions that typically include a limited number of monthly transactions or a minimum balance. Some money market accounts may allow limited check-writing privileges, while others may not offer checks at all. Also, note that there are differences between money market funds and money market accounts.

In addition to money marketing accounts, a certificate of deposit (CD) through an online bank can make the most of your money through higher interest rates. For those not familiar with CDs, the investment works by placing money in a high-yield account for a certain period of time (the most common time periods are six months, nine months, 12 months, 48 months, and 60 months). The drawback of a CD is that a penalty is incurred if the money is withdrawn before the agreed upon time period.

Do Your Homework

The good news is that there are plenty of options out there when looking for a bank to hold your money. You also have the power to research these different options thanks to the Internet. Don't forget that the Internet can be used to help you with your financial goals. Make sure to consider the pros and cons of online banking and weigh them against your situation and needs. Remember, you can find valuable tools to help you save at Get Rich Slowly .

This Guide to Money answer includes the topics: Save, Banking.

 
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