What is Online Banking? Pros and Cons

Online banking and traditional banking share many of the same features, though there are also notable differences.

An online banking service doesn’t have a physical, brick-and-mortar location like a traditional bank.

However, online banking typically offers many of the same services as traditional banking, including electronic fund transfers (EFT), access to ATMs, direct deposit, and the ability to make debit card purchases.

With online banking, you can perform transactions and monitor your bank accounts from a web browser or mobile device 24/7 – no need to visit a physical location. Online banking services are easy to use. Just follow these steps.

• Navigate to the web. Set up an online account with your bank using a web browser or your mobile banking app.
• Create a login. Choose a secure username and password and opt into multi-factor authentication to keep the login process safe and secure.
• Download the app. Download the mobile app to your smartphone or tablet for on-the-go access to your accounts.
• Log in to your account. Once logged in, you can check your account balances and perform transactions.
• Check your account balances. You can monitor your accounts in real time. This means you can immediately flag any suspicious-looking transactions or avoid purchases that may overdraft your account.
• Transfer funds. Online banking lets you transfer money between your accounts right from your computer or phone.
• Pay bills. With online banking, you can make payments to individuals or companies. To avoid late fees, set up autopay for your recurring bills.
• Deposit checks. There’s no need to take a check to the bank to cash it; just use the mobile check deposit feature in your online banking app.

Online banking through a credit union or bank offers a full range of services designed to simplify financial management. Many online banking options include the following services and features:

• Mobile check deposit: Deposit checks directly into your account using your smartphone’s camera.
• Saving and budgeting tools: Manage your expenses by automatically categorizing your transactions and tracking your savings goals.
• Real-time account monitoring: Check your balance 24/7, even outside regular business hours.
• Easy automatic payments: Pay recurring bills automatically to reduce the risk of missed payments.
• Automated savings features: Stash a percentage of your paycheck in your savings account automatically to help reach your savings goals faster.
• Digital payment system integration: Use Apple Pay^®, Google Pay^®, or a similar system for seamless online and in-store transactions.
• Credit card and loan management: Check your balances and pay your bills to avoid late fees and additional interest charges.
• Secure online statements: Instantly view your account history without waiting for statements to arrive in the mail.
• Cardless ATM withdrawals: Use your mobile app to withdraw cash, even if you don’t have your debit card with you.
• 24/7 online chat and customer service: Speak to a customer service agent to get the answers you need without having to visit a bank branch.

Like any other financial service, online banking has its pros and cons to consider. Here’s what you need to know.

Pros of online banking

Online banking often prioritizes user-friendly digital platforms, offering a range of features designed to save time and reduce costs.

• Convenience. Manage your finances, including transferring funds and paying bills, from the comfort of your home or on the go with just a few clicks.
• 24/7 account monitoring. Check your account balances, payments, deposits, and more at any time of the day or night.
• Faster and safer transactions. Complete transactions quickly using a secure connection to prevent identity theft and other security concerns.
• Lower fees. Bank without the fees – enjoy reduced ATM fees, minimal maintenance charges, and fewer account service fees.
• Higher interest rates. Earn a higher return on your savings than with a traditional brick-and-mortar bank.

Cons of online banking

While online banking offers numerous advantages, it also has a few potential downsides. Here are some key drawbacks of online banking services.

• You need an internet connection. Technical issues or website maintenance could temporarily limit access to your accounts.
• Harder to deposit cash. You’ll need to find in-network ATMs that accept cash deposits, which could be less convenient than visiting a physical location if there isn’t a large fee-free ATM network.
• Potential security concerns. Online banking is generally safe, but there’s still a small risk of phishing attacks or data breaches.
• No physical branches. This can be inconvenient if you need face-to-face assistance for more complex issues.
• Fewer product offerings. You might need to go elsewhere to open a certificate of deposit (CD), money market account (MMA), or investment account.

Here are some key questions to ask yourself to help you decide whether online banking is a good fit for you.

• What services are you looking for? Different financial institutions offer different types of bank accounts, features, and benefits, so identify what’s most important to you and verify that these services are offered.
• How secure is your information? ​​Investigate their security measures and track record in handling data breaches. A bank with a solid reputation for security is more likely to be effective in protecting your personal and financial information.
• What customer support do they offer? Assess the quality of customer service provided by the online banking service. Consider availability and the channels used for support, like phone and chat.
• How can you deposit cash? Check whether there are in-network ATM branches near your location that support cash deposits.
• How important is in-person service to you? Consider your comfort level with conducting all banking activities digitally or whether you prefer the reassurance of speaking with a banker in person.

Opening a bank account online is simple. Once you’ve chosen a bank, follow these steps.

• Navigate to the online banking service’s homepage or download the app.
• Select the type of account you want to open.
• Complete the application and upload any required documents to open an account.
• Start using your account by setting up direct deposit, switching over your automatic bill payments, and transferring your funds from your previous bank.

Whether you want to simplify your finances or manage your money using the latest technology, online banking can bring a world of convenience to your financial life. Weigh the pros and cons of online banking to see if it’s right for you.

Opening an online bank account through Chime is fast and easy, so you can start using your account in minutes.