Online banking has become the norm for many simple bank transactions, making it easier for customers to check their accounts, pay their bills and move money from one account to another. Despite this rise in the use of online banking, this does not necessarily mean that direct internet banks are a substitute for their brick-and-mortar counterparts in all cases. Here is a quick look at the benefits and drawbacks of internet banks.
- Convenience — other than times when technical maintenance is being done, internet banks are open 24 hours a day, 365 days a year.
- Better rates — the lack of significant infrastructure and overhead costs allow internet banks to pay higher interest rates on savings and charge lower mortgage and loan rates.
- Services — internet banks typically have more robust online services that offer a comprehensive set of features that may not be found on the websites of traditional banks.
- Mobility — online banking now includes mobile capabilities, with new applications continually being created to expand and improve this capability.
- Transfers — accounts can be set up to automatically fund from a traditional bank account via electronic transfer, usually at no cost.
- Ease of use — online accounts are easy to set up and require no more information than a traditional bank account.
- Lack of a bank relationship — a traditional bank provides the opportunity to develop a personal relationship with that bank.
- Transaction issues — sometimes a face-to-face meeting is required to complete complex transactions and address complicated problems; a traditional bank can host meetings and call in experts to solve a specific issue. Additionally, international transactions may be more difficult (or impossible) with some internet banks.
- Services not offered — some internet banks may not offer all the comprehensive financial services (such as insurance and brokerage accounts) that traditional banks offer.
- Security — sophisticated encryption software is designed to protect your account information, but no system is perfect; online accounts are subject to phishing, hacker attacks, malware and other unauthorized activity.