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Should I Switch to an Internet/Online Bank?

As more and more banks are opening online branches, often with better CD rates, savings rates, and checking rates, and lower fees. It might be time to ask yourself whether it makes sense to switch partially or completely over to an online bank.

What are the Advantages of an Internet Only Online Bank?

Typically, online banks have better deposit rates across the board. How are online banks able to offer this? Because they cut out all the overhead costs with maintaining a brick and mortar bank. You should look for a bank with no minimum balances and no fees. Many online banks will refund you a portion of ATM fees, and some like Ally Online Checking will refund all ATM fees.

You should look for an online bank that offers top quality telephone customer service. You should call their lines and see how long their hold times are, and how knowledgeable their agents are. Telephone support is crucial in an online bank because you can’t just go into a local branch and talk to someone in person.

Online banks typically offer free ACH transfers between accounts. So you can easily link an online account with a traditional bank. Make sure you read up on how many free transfers you have per month, as it can vary by bank.

Many online banks also have checking accounts that allow you to write checks online. Some also have physical checks that you can use. Most online checking accounts will offer you a debit card for you to use.

Another thing to look out for is the ability to set up free bill pays and auto pays. This is important if you use your bank to pay credit cards and various other bills. Many online banks have and offer these services for free.

What are the Disadvantages of an Internet Only Online Bank?

The disadvantage is pretty simple – you won’t be able to visit your bank and talk to someone.

In the end, make sure you do your research before choosing to switch to an online bank. Many times it might make sense for you to have accounts with both an online only and traditional bank. I’ve found that Ally Bank has some pretty good rates on their CDs and savings accounts. Their checking account also has all the features I listed above. In addition, I’ve found that their customer service has been very responsive and helpful.

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