When you’re looking at where to bank, you have a lot of options. In the old days, you would take your money to the local banker. Now it seems like all of those little local banks have been bought out by big banks. And thanks to the proliferation of online banking and ATMs, it’s rare that we even need to go into those banks. In fact, I’m not sure when I last went into the branch of my bank.
Many people have begun opening accounts with online only banks or primarily online banks (meaning a bank with very few brick and mortar locations, often none in their area), but they keep their local bank account in case they need to go into a physical location. But do you need to keep a local bank or can you do all of your banking online?
What are the benefits to online banks?
Typically, the major benefit to an online bank is that because they have lower overhead (few physical locations), their rates are higher. If you’re a saver, this is exactly what you want. It’s always great to get some extra interest from your money.
Like traditional banks, they still have phone lines you can call if you have any questions, and since their primary business is done online, they typically have great websites and apps to help you manage your money?
What are the downsides to online banks?
If you need a large amount of cash, you will need to go to an ATM, and there are often daily withdrawal limits, so you may need to visit an ATM a few days in a row to get the money you need. (Of course, how often are you making huge cash transactions?) You also need to be sure that you have access to fee-free ATM withdrawals.
You will also need to use an ATM to deposit cash. (Most banks now let you deposit checks via their apps, but obviously that doesn’t work for cash.) Not everyone is comfortable with depositing cash into an ATM, just in case something goes wrong. Since I don’t do a lot of cash transactions, I can’t tell you the last time I needed to deposit cash.
If you need a bank check (such as for a down payment on a house), you will have to wait a few days for it to arrive. For some people, this will be a non-issue; for others it’s a much bigger deal.
If you have questions, you will have to wait on the line for a representative on the phone. You can’t just go in and talk to a banker.
Should I bank online only?
Take a look at the downsides to online banking. If those situations don’t apply to you, then you can seriously consider moving all your banking online. You will likely find better rates and lower fees. However, there is nothing wrong with sticking with a physical bank, even if it’s just because you like stopping at the drive thru and using the cool pneumatic tubes to deposit your money!
Megan is a 30-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.