We’ve talked about banks, but I heard about something called an online bank. Is it just another fancy name for online banking?
Online banking is the ability to view your account activity, pay bills, transfer funds, deposit checks into your bank account, etc using the internet, either from a computer or a mobile device. Most banks and credit unions offer the facility of online banking in addition to their branches.
On the other hand, an online bank is an internet-only bank. You can access your account only through the internet since the bank has no physical locations or branches. Online banks are also known as direct banks or virtual banks.
Why would I ever use an online bank? Are there any advantages?
Because online banks don’t have physical branches, the have much lower costs compared to traditional banks. Therefore, most charge lower or no fees, and offer higher interest rates on deposits. Most online banks are also part of ATM networks, which means their customers can access a large number of ATMs without paying any fee.
Are there any disadvantages of online banks?
Since there are no bank branches, all your interactions are either online or over the phone – you cannot get a teller’s personalized help for your transactions. Your options for depositing cash could also be limited – it would be done either using an ATM or through online transfers.
Do online banks give loans as well?
Yes, some online banks do offer loans.
Are online banks safe?
Some of the better online banks implement the latest security measures, and are as safe as traditional banks. Most online banks are also FDIC insured.