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A Guide to Online Banking

Still setting foot inside an actual bank? Why not take advantage of online banking? Online banking doesn’t have to be intimidating — after all, millions of people deposit money and pay bills from a smartphone or computer.

If you haven’t quite taken the leap, we’ve put together a short guide to help you learn how to get started.

Main Takeaways: Your Guide to Online Banking

  • Online banking allows you to conduct your financial services fully online. Some banks have no storefronts and others offer extensive online services while still having physical locations.
  • Benefits to online banking include convenience, speed, high interest rates, and more. This is all possible without having to spend funds maintaining a physical property.
  • Drawbacks include safety, no face-to-face interaction, and more. This is caused by an inability to go into a store and speak with an employee.
  • Setting up your online banking account is easy. What you are responsible for is making sure that an online bank, and the services they provide, fit your style of handling financials.

What is Online Banking?

Online banking is like traditional banking except all transactions are conducted through a financial institution’s website or mobile banking app.

You can do almost everything online that you could do standing in line at the bank. You can open checking and savings accounts, make deposits, withdraw money and pay bills online.

You’ll need a computer, smartphone or tablet if you’d like to bank online. Every time you log in, you’ll have to provide a username and password, and in some cases, you’ll have to answer a few security questions.

All of your banking information is accessible only by you and your bank.

Benefits of Online Banking

Online banking has a few perks. Before you jump into online banking, consider the pros and cons first.

Convenience. Banking from your phone or laptop is a huge time-saver. You can pay bills, check your balance and transfer money between checking and savings accounts with just a few clicks.

Higher interest rates. Online banks can pay up to 5 times more in interest than traditional banks, according to a study by DepositAccounts.

Instant notifications. You can opt-in for text message and email notifications, which will be sent to you based on your preferences.

For example, if your balance is negative or a large purchase is made, you’ll receive a text or email so you can monitor your account around the clock.

Always accessible. If you only use brick-and-mortar bank branches, you’re tied to their business hours, usually 9 a.m. to 5 p.m., and only a few hours on Saturday (most are closed on Sunday). Online banking is available 24/7.

No paperwork. Online banking doesn’t require you to fill out any paperwork, such as an application form, withdrawal slip or paper check. Most offer the ability to deposit checks by taking a picture from your phone.

Drawbacks of Online Banking

Since online banking depends on the reliability and speed of the internet, there are some drawbacks you may face related to that fact and a few others. Here are some other disadvantages you can consider.

Impersonal. You won’t get a warm, fuzzy personal experience when you bank online. You can still chat with customer service reps using the bank’s online chat or by calling, but you won’t be able to walk into a bank and see real people.

Some tech-savviness required. There might be an online banking learning curve. For example, you’ll need to know how to navigate online services, how to set up direct deposit online and how to download a mobile app.

Fortunately, a lot of banks provide tutorials so you know how to use online banking.

Data breaches are possible. Any bank (online or traditional) that conducts business online is vulnerable to cyber hackers. According to a study featured in ABA Banking Journal, nearly ¾ of Americans were more concerned about data privacy in 2018 than they were in 2017.

You can’t do everything online. There are times when personally visiting your bank makes sense, such as when you need to buy rolls of quarters, need a money order or certified check to pay for a large purchase or need to deposit cash.

In these instances, you’ll have to physically go to a bank branch or find the nearest ATM.

How Online Banking Works

Once you sign up for online banking, you can log in and perform all your financial transactions. You’ll have access to customer service support online or by phone if you experience technical difficulties or need other assistance.

Financial transactions are completed instantly, and as long as you familiarize yourself with your bank’s website, services and mobile app, most online banking is fairly intuitive.

Who Offers Online Bank Accounts?

Most traditional brick-and-mortar banks offer online banking services, and there are some banks that are completely online.

If you don’t use your bank’s online services, ask what they offer and do some research to see if online banking is something you would benefit from.

Some traditional banks offer a wide range of online services, such as credit monitoring and budgeting apps. Everyone’s financial needs are different, so determine what kind of online banking services might benefit you. Here are a few examples of each.

Online-only banks

  • Ally Bank
  • Discover Bank
  • Chime Bank

Brick-and-mortar banks with online services

  • Wells Fargo
  • Bank of America
  • Citizens Bank

How to Set Up an Account

If you’ve never done any online banking, the steps to get started are similar to opening a brick-and-mortar bank account.

  1. Open a new checking or savings account. Do this with one of the banks listed above. An online-only bank only requires your driver’s license number and Social Security number.
  2. Log into your account. Once you’ve opened your account, you’ll have access to the bank’s site to log in and make transactions as well as check your balances and statements. You’ll also receive a debit card in the mail for those times when you want to do business in person.
  3. Explore your perks. Take advantage of the online banking services your bank or credit union offers. You can do this in a number of ways, including downloading your bank’s mobile app and registering for online banking services.
  4. Maintain your accounts. You’ll be able to check your account balance online at any time, as well as perform transactions wherever you go to your bank. You can do online banking when it’s most convenient for you, and when you need to visit a bank branch, you can still do so.

Give Online Banking a Try

Both traditional and online-only banks have become more and more competitive as there are thousands of banks you can choose. As mentioned above, online banks typically offer higher interest rates.

Some also offer financial rewards and incentives just for signing up and opening an account. Concerned about security measures? Online banking is constantly being improved. Some now offer voice, facial and fingerprint sign-in.=

As with any technology, you still have to do everything possible to safeguard your financial information. Whether you choose online banking or traditional banking, remember that you’re in charge of your finances. Do what’s best for your lifestyle and situation.

Want to learn more? Check out Benzinga’s guides to the best checking accounts, best online checking accounts and best online savings accounts.