Online banking is big business. From viewing statements and transactions to setting up direct debits and paying bills, the newer banking options offer customers quick and convenient ways to manage their finances. It’s so popular that it’s estimated over 161 million people use internet banking in the US alone.
Although traditional banks often allow customers to do their banking online, if you’re looking to open a new account, you may want to consider an online-only bank. You might have concerns about cybersecurity, that’s only natural. Here are a few things to think about if you’re weighing up options.
Breaking Free From Brick-And-Mortar
Some people are still reluctant to move to fully online banking services. There’s a feeling of comfort knowing you can head to a local bank branch if there’s something amiss with your account.
A survey by GOBankingRates found that 25 percent of Americans believed that online banks charged higher fees than traditional banks, and 33 percent thought brick-and-mortar banks were safer.
But reality paints a different picture. In fact, your average online bank is just as safe as your local high street bank.
Banks possess a vast amount of personally identifiable information (PII) on each customer, such as birth dates, addresses and social security, phone, and credit card numbers. Consumers put their faith in banks, relying on them to provide the best security possible to keep their sensitive data safe.
When these details fall into the wrong hands, cybercriminals can open up credit card accounts, file tax returns, or just spend every cent in an account.
The Bigger the Bank, the Bigger the Breach
Even the big players in traditional banking aren’t safe from attack. In 2014, JPMorgan Chase, the largest bank in the U.S., reported a breach that affected 76 million individual account holders and seven million small businesses.
Although the company reported that no financial data was compromised, hackers managed to obtain customers’ personal information, including names, addresses, telephone numbers, and email addresses.
The Good News
Financial institutions, including banks, are working hard to ensure their systems are as rigid as possible, spending an average of $2,300 per employee on cybersecurity.
They are constantly improving on existing systems and coming up with new security measures as technology changes. So from a security perspective, online banking, especially a well-established one, is as safe as banking with a traditional bank.
Still not convinced? Take security measures into your own hands, here’s how.
Helping Protect Yourself And Your Money
There are a number of measures internet banking users can take to help with personal financial security. Installing and updating anti-virus software on smartphones, laptops, and desktops will help protect mobile devices.
But what about all the other devices on your home network?
Internet of Things
In this era of the Internet of Things (IoT), our homes have become “smart”, and everything is now connected. Unfortunately, having so many devices linked together provides hackers with different avenues to breach your network.
It’s therefore vitally important to take care of IoT security and encrypt data. Downloading a VPN ensures a secure connection and shields your online activities from cybercriminals. It’s not always possible to install a VPN on individual devices, such as security cameras, so encrypting your home wireless network with a VPN router ensures every device linked to the wifi is protected.
Choosing an Online Bank
Online banking offers many advantages for those ready to move away from brick-and-mortar banks. Higher interest rates and lower fees are just some of the ways in which customers can reap the benefits.
If you’re ready to explore the online world of banking, here are a few things to consider.
Avoid Paying Fees
Recent research suggests that the average monthly fee for holding a checking account in a traditional bank is $14.13. In contrast, the majority of online banks charge no maintenance fees. Without the additional costs of brick-and-mortar overheads, these banks can pass savings onto their customers.
Read The Small Print
Monthly fees may be a thing of the past but it’s worth reading the terms and conditions to see what other fees could be incurred. Some banks require you to have a minimum amount in the account. Others may charge a fee for linking two accounts together or if you make more than a certain number of transactions in a month. Reading the small print can help you find the account best suited to your banking behavior and avoid unnecessary fees.
Earn Interest On Your Hard Earned Cash
With the Federal Reserve setting interest rates so low, it can be difficult to find a traditional bank that will offer a good return on savings. Switching your hard-earned cash to an internet banking savings account should give you higher interest rates — in some instances 20 times higher than the national average.
Find the Website or App That Suits You
Communicating and doing all your transactions online means you need to be comfortable using your bank’s website or mobile app. Some banks work with FinTech companies and incorporate handy features into their sites to help you manage your money.
Online reviews and customer feedback can often provide useful insight into how user-friendly systems are.
Check for Insurance
The good news for account holders is that the Federal Deposit Insurance Corporation (FDIC) insures up to $250,000. This cover should be standard, especially with established online banks, but it’s definitely worth looking into if you’re thinking of opening an account with a small startup. Check with the bank or do a search on the FDIC’s website.
Top Online Banks
There are plenty of banks that score highly on banking surveys conducted by companies such as J.D. Power. Here’s our pick of the best on the market.
Best Overall — Ally Bank
Ally Bank consistently stands out as one of the best online banks and it’s easy to see why. Its website makes it easy to open high-yield savings, checking, CDs, or money market accounts. Customers can also apply for auto loans, home financing, and credit cards or access brokerage services via Ally Invest.
No minimum balance, no monthly fees, and free use of Allpoint ATMs within the US are great for keeping costs down. The bank’s rates may not be the highest on the market, but they’re definitely competitive and this combined with its wide range of products makes Ally Bank a firm favorite.
Best for Savings — Brio Direct
If you’re looking for the best return on your savings, Brio Direct offers great interest rates on its savings accounts and CDs. Its no-frills high-yield account pays 1.65% APY (as of March 2020) which is one of the highest available and can be opened with as little as $25.
To move money in and out of a savings account, customers require an external bank account as Brio Direct doesn’t offer checking accounts. Transfers can be made via ACH payment, wire transfer, or check. Brio Direct is FDIC insured through its parent company, Sterling National Bank.
Best for Managing a Budget — Simple
If you struggle with managing your finances, Simple can help. By integrating budgeting and savings tools into its checking account, Simple has removed the need to sign up for third-party apps. Spending is automatically tracked to help you understand where your money is going.
Account holders set goals they want to save for and, after calculating monthly bills, Simple predicts how much can be spent each month without jeopardizing these goals.
Cash can be set aside in a separate Protected Goals Account, which earns a good rate of interest while the fund builds.
Best for Travelers — Charles Schwab
Charles Schwab is a full-service financial services provider offering savings and retirement accounts, investment products, and home loans. But the real draw for using this online bank is its checking account that offers unlimited free ATM transactions within the US, charging no fees for using other banks’ ATMs and reimbursing any fees charged by those banks.
In addition, Charles Schwab has no transaction charges when using foreign currencies making it a popular choice for frequent travelers.
Best for International Transfers — TransferWise
Although not actually a bank, companies like UK-based TransferWise deserve a mention. These companies offer even more ways to move away from traditional banking and move all financial services online.
Traditionally, sending money abroad through a bank has been expensive with inflated conversion rates, charges, landing fees, and countless hidden costs. Customers can find themselves paying anywhere up to $50 for a single transaction.
TransferWise takes away all those fees and offers a cheaper alternative. Customers make a transfer from their bank account into a borderless account where the money is converted to the currency of the destination account using live exchange rates. TransferWise takes a small percentage of the transaction which is much less than bank or credit card transfer fees.
Take the Next Step
If you’ve been debating whether online banking is for you, consider the last time you needed to visit your local branch for assistance. It may seem easier to continue banking with a traditional brick-and-mortar bank but, switching your finances online could see your savings increase and save you money in the long-term, all safe in the knowledge that your money is as secure as it is in traditional institutions.