Online banking allows you to manage your bank account over the internet from a computer or mobile device. You won't need to go to a bank branch, and you'll be able to complete all of your banking tasks whenever it's most convenient for you, including outside of normal banking hours.
Online Banking: Definition and Examples
You can bank online through an online-only bank or credit union or through the online services provided by most brick-and-mortar banks and local credit unions. Paying bills, transferring funds, applying for a loan, depositing checks, and verifying transactions and account balances are all common functions. Bank of America and Wells Fargo are two banks that offer online banking.What is the Process of Online Banking?
Online banking is designed to save you time and allow you to do your banking on your own time rather than during the hours that your local bank branch is open. Starting with opening an account, you can do almost anything you can do at a traditional bank or credit union location online. Traditional banks and credit unions have had one advantage over their online counterparts: the ability to withdraw funds via ATM. Online banks and credit unions are increasingly providing access to a network of ATMs that do not charge fees. Some banks will reimburse you for ATM fees up to a certain amount once a month.Account Opening
Online banking allows you to open checking, savings, and other types of accounts without having to print or sign anything. With electronic signatures, the entire process could now be completed in under 10 minutes. You can sign up for online banking if you're a customer of a financial institution that offers it. To get started online, you'll usually need the following items at the very least:- A connection to the internet
- A computer, tablet, or smartphone with a web browser.
Number of your bank account
Personal information, such as your birth date and Social Security number, is used to verify your identity. You'll need the same information, minus your bank account number, to open an account with an online-only bank or credit union with which you've never done business before. Additional identification, such as a driver's license, may be requested. Registration entails creating a log-in (usually your email address) and a password. Once you've completed the registration process, you'll be able to log into your account and begin banking online using only an internet-connected device.Bills to be paid
Your bank may be able to print and mail a check for you each month in place of writing checks to pay your bills. However, even if the amount you owe changes every month, you can send money to a payee electronically for greater convenience.Funding Transfers
Using your computer, you can make intrabank transfers from your checking account to your savings account or into a certificate of deposit (CD). Through your bank's person-to-person services, you can even link your accounts at different banks and send money to friends and family almost instantly.Making a Loan Application
Getting a loan has a reputation for being a time-consuming process, but it doesn't have to be. Filling out your application online expedites the credit check, allowing your bank or credit union to respond more quickly. Some financial service providers that accept online loan applications make funds available the same day you are approved. Other online-only lenders can make loans in less than a minute.Check Deposit
If you have a smartphone and someone pays you with a check, you can deposit it from home. You take a photo of the check and submit it for payment using a mobile check deposit through your bank's app. The check doesn't have to be mailed.Getting a Glimpse of What's Going on Now and in the Past
Most credit unions and banks allow you to check your available balance, confirm that your most recent transactions were completed, and check previous monthly statements online. You should be able to look up transactions by date range and type, such as a bank card transaction.Keeping Up to Date
The ability to set up alerts is another significant advantage of online banking. You may receive a text or email when your bank detects potentially fraudulent activity or your balance falls below a certain threshold. You can be notified when deposited funds are available and when a check has cleared. These alerts are useful for gathering information, but they can also assist you in preventing criminal activity. For example, if you are notified of a password change that you did not make, you can contact your bank right away and ask them to stop the perpetrator from draining your account.Traditional Banking vs. Online Banking
There are significant advantages to using a bank that allows you to manage your account primarily or exclusively online, but traditional banks also have advantages.Interest Rates That Are Lower
On your deposits, online-only banks tend to offer a higher annualized interest rate, also known as the "annual percentage yield" (APY). Because they don't have the same overhead as traditional banks, they can pass on some of the savings to you. Some traditional banks' online divisions, on the other hand, may offer competitive rates. Online banks also have a lower "annual percentage rate" on loans, which is referred to as "interest rate" (APR). Higher interest rates on savings accounts are generally desired so that your money can work harder for you. Lower interest rates, on the other hand, are preferable when borrowing because they lower the total cost of the loan. Shopping around and comparing online bank rates to traditional bank rates is a good idea, but you'll almost always get a better deal online.Fees are reduced.
For the same reasons that they pay more in interest, online-only banks typically charge lower fees than traditional brick-and-mortar banks. In fact, they are less likely to levy fees for specific services or for failing to maintain a certain minimum average balance.Transactions that take place in person
Even though you can deposit checks using mobile deposit or withdraw cash from affiliated ATMs, an online bank may not be practical if you frequently make large deposits or withdrawals that must be handled by a bank teller. Some banks impose a daily mobile deposit limit and require you to make deposits in excess of that amount at an ATM or branch. This may be difficult if your bank doesn't have a large network of free ATMs or a branch nearby. The amount you can withdraw from ATMs is usually limited on a daily basis by most banks. If you need more money and can't persuade your bank to raise your limit, you'll have to apply for a cash advance in person, which you won't be able to do if you can't visit a branch. Notary services, safe deposit boxes, and cashier's checks are all available through traditional banks. Typically, online-only banks are unable to do so. Tip: Keeping accounts at both an online-only bank and a traditional bank allows you to take advantage of higher-interest savings account rates and lower fees at the former while still having access to in-person services at the latter.Problems with Technology
If you're not used to using technology, online banking may be difficult to master. Glitches can occur, and if your computer—or the bank's system—is down, you may be forced to postpone a critical transaction. For complicated situations like thorny customer service issues or discussions about various loan types, a face-to-face meeting at a conventional bank may be advantageous.Concerns about safety
Online banking is more safe than traditional banking in many ways. Having your pay deposited directly into your bank account eliminates the risk of your check being stolen in the mail. Furthermore, no one can copy your account information from checks you send out; bank computers securely send and receive information without storing it. Important: Federal law may protect you if you act quickly after detecting fraud or errors during an electronic funds transfer. Phishing schemes, which use an email or text to persuade you to reveal sensitive information, are a source of concern. You can avoid a lot of them if you only send information to people you trust and only through legitimate websites. Pay attention to what you click on, and contact your financial institution if you have any concerns.Important Points to Remember
- You can manage your bank account online using a computer, tablet, or mobile device.
- It eliminates the need to visit a bank branch and allows you to conduct transactions whenever it is most convenient for you.
- You can bank online with an existing relationship with a traditional bank or credit union, or you can open an account with an online-only institution.
- Online banks typically pay higher interest rates on deposits and charge lower interest rates on loans. Still, they may not provide the same comprehensive services as local brick-and-mortar banks.
