One alternative gaining some momentum is online banks, which lack branches and boast low fees and better deposit rates. But is the buzz too good to be true? MainStreet talked to industry experts about what consumers should know before making a permanent switch to online banking.
Fees will be lower and rewards will be higher.
For the most part, everything that you’ve heard about the lower fees and higher deposit rates associated with online banks is on the up and up. This is because these institutions don’t have to maintain bricks-and-mortar locations and most have been letting the savings trickle down to widen their consumer base, according to NerdWallet CEO Tim Chen.
“Generally, debit card offerings are attractive,” says Gerri Detweiler of Credit.com, adding that many online banks are continuing to offer rewards for debit card purchases, despite the Federal Reserve’s limit on interchange fees.
ATM fees, too, are largely nonexistent as online banks either offer free access through a partnership with an ATM network or reimburse users for any fee they may incur when they use a machine outside of it.
Some services may take more time.
While these offerings are undoubtedly attractive, online banking may not be for everyone. Detweiler says, for instance, that those who are heavily reliant on making big cash deposits might find online banking insufficient, since these deposits usually need to be mailed to the financial institution.
While online banks offer a variety of deposit alternatives – some let you send money via a MoneyGram while others, namely USAA, let you send checks via UPS – these can take a little longer to process.
“That’s the big hang up,” Detweiler says. “Customers who tend to cut close to the wire might be better off with a local financial institution.”