Is Internet Banking the Best Choice for You?

With more of our everyday banking operations like depositing checks and paying bills going mobile, maybe it's time to ditch your brick-and-mortar bank for good and go with an Internet-based bank.

Before you do this, however, be aware that just like with most financial decisions, there are pros and cons to Internet banking. If the positives outweigh the negatives for your personal situation, maybe a switch wouldn't be a bad idea.

Positive: Your money can make more money
Banks that conduct most of their operations online don't have to worry about expenses like rent, office supply costs, and personnel to staff their branches.

As a result, Internet-based banks can offer some of the highest rates on deposit accounts, such as savings accounts and CDs.


Savings account interest rates in the United States are ridiculously low right now. In fact, the 0.01% interest you can expect from some of the big banks makes people question why they use savings account at all. But some Internet-based savings accounts pay closer to 1%.

For instance, Ally's online savings account pays 0.87% as of this writing. And some CDs pay even better rates, like a five-year CD from GE Capital Bank, which pays a 2.25% annual percentage yield. In contrast, Bank of America's best rate on a five-year CD is just 0.15%. Of course, these are just two examples, so do your homework first, but it simply makes sense to park your savings in an online account.

Negative: customer service concerns
If you truly enjoy some of the conveniences of traditional banks, this could be a big hurdle to overcome. No matter how advanced technology gets, some people (myself included) like being able to get in the car, drive to the bank, and talk to a real live person.

Source: Pixabay

As far as the customer service of online banks is concerned, some do have high ratings, but do your homework before opening an account. If I'm not getting anywhere with Wells Fargo's customer service call center, I always have the option of going to the bank. This isn't the case with online accounts, so make sure the bank you choose has a good reputation for customer service.

If you find out later that the customer service line is awful, there's really no alternative way of dealing with account issues. The site keeps a collection of reviews of the various banks, and is definitely worth a look before opening an online account.

What if you need cash?
Now, if you need to get cash out of your account, you may assume it would be more costly and inconvenient with an Internet-based bank. After all, when you go to an ATM your bank doesn't own, you generally get dinged with a fee. And most Internet banks don't exactly have a vast ATM network.

Flickr/ OTA photos

But a lot of Internet banks realize this and offer ATM fee reimbursement. This actually makes ATM banking more convenient than the big banks like Wells Fargo and Bank of America. Essentially, every ATM you see from these banks and others will be a part of your network and won't cost you a dime to use.

Some may make you wait until the end of the month before the fees are reimbursed, but it's still convenient knowing that you have free access to your money at whatever bank's ATM happens to be closest to you.

So, who could make the switch?
Basically, the best way to determine whether you could comfortably switch to Internet banking is to think of how many times you've set foot in an actual bank, or gone through the drive-thru, over the past year. And how many times have you experienced issues with your account that couldn't be solved with a call to customer service?

If the numbers are very low, chances are you won't have to change your banking routines too much to adapt to an Internet-based bank account. And you could actually end up saving money with the lack of ATM fees and the higher interest rates you can expect to receive.

Internet banking + Apple? This device makes it possible.
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its destined to change everything from banking to health care. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here

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Matthew Frankel

Matt brought his love of teaching and investing to the Fool in order to help people invest better, after several years as a math teacher. Matt specializes in writing about the best opportunities in bank stocks, real estate, and personal finance, but loves any investment at the right price. Follow me on Twitter to keep up with all of the best financial coverage!

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