Posted on May - 10 - 2010
Should I do my banking online?
Online banking is a topic that has not gotten much exposure on the Student Platinum blog, but has become very commonplace in personal finance. When I say online banking, I don’t mean the portals that brick & mortar banks (like Bank of America or Citizens Bank) give you to track your accounts, I mean organizations like ING Direct, Discover Bank and Ally Bank that exist 100% in the electronic world.
If you watch TV regularly, you probably have seen commercials for products like Ally Bank’s online savings account. They usually offer interest rates that are much higher (sometimes more than 4x traditional savings accounts) at the cost of physical convenience. Let’s break down the pros and cons of banking online and see if it’s right for you:
Pros
- Much higher interest ratesDue to the fact that these banks don’t have physical locations (and therefore significantly lower operating costs), they are able to pay you more to take care of your money while you are saving it.
- Many online banks reimburse most (if not all) ATM fees
- They are FDIC insured up to $250,000 per account, just like brick & mortar banks
Cons
- Deposits must be mailed in, can take a few business days for processing
- If you are transferring money from your online account to a normal bank account, it isn’t instant. Usually, there is a lag of one or two business days.
- The potential for customer service frustration is higher. You can’t just walk into a bank branch if you need to… all CS interactions will have to be via phone, email or online chat.
The Verdict
One thing about online banks that is especially applicable to students is ATM fee reimbursement. For most of you, you go to school at a college that probably isn’t close to home and therefore your hometown bank may have no footprint. A bank account that refunds ATM fees is super useful and will help you avoid getting charged $2-4 every time you want to take out money.
Otherwise, online banks really excel at providing excellent savings accounts. The higher interest rates just can not be beaten by traditional banks; if you want to earn the most interest you can in a risk-free way without penalties, an online savings account definitely satisfies those criteria.
Scholarship Points Code: EBANKING1 – Expires June 11, 2010
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