Is online banking safer than traditional banking?
The Bottom Line
You also need to be on the alert for phishing scams that try to trick you into revealing your account information. Are online banks riskier than brick-and-mortar banks? No. Online banks use the same encryption and FDIC insurance that brick-and-mortar banks do to protect their customers.
- Phishing. Phishing is a means of gathering personal information by posing as a trusted institution—like your bank. ...
- Viruses. If your bank doesn't use secure software, you could be exposed to malware or viruses that can corrupt your computer or phone.
- Maintenance outages.
The lack of overhead gives internet banks advantages over traditional banks, including fewer or lower fees and accounts with higher APYs. Internet banks lack personal relationships, no proprietary ATMs, and more limited services.
Online banks are better than traditional banks when it comes to minimizing fees and securing the most competitive rates. These banks also tend to offer superior websites and mobile apps with more features. When it comes to finding a full range of financial services all in one place, traditional banks tend to win out.
Most online banks and credit unions are federally insured, which means that the US government will protect your money in the event the bank or credit union fails.
- No physical branches. A traditional bank provides the opportunity to have face-to-face interaction with the staff at your local branch. ...
- Cash deposits can be a challenge. Internet banks make depositing a check from your phone easy, but cash can be a little trickier. ...
- You can't get foreign currency.
Federally backed online bank accounts are safe to use and are insured just the same as brick-and-mortar banks. Still, it's always good to have some caution around protecting your personal information.
Open an online bank account if you prioritize easy access and high returns on deposits. Online banks typically offer the best rates and lowest fees of any bank type. Online banks don't offer branches and assume you're proficient with navigating online apps and websites.
| Bank | The Ascent's Rating |
|---|---|
| Western Alliance Bank | 4.25 |
| SoFi | 4.00 |
| Wells Fargo | 4.00 |
| Axos Bank | 3.50 |
Should I move my savings to an online bank?
You can typically find higher rates at online banks, compared to traditional brick-and-mortar banks. That's because traditional banks need to maintain physical branches, which can be a significant cost. Lower overhead may give online banks an edge, in terms of rates.
| BANK | MONTHLY SERVICE FEE FOR CHECKING ACCOUNT | MOBILE APP RATING |
|---|---|---|
| American Express National Bank | $0 | 4.5 |
| Axos Bank | $0 | 4.5 |
| Bank of America | $4.95 | 4.7 |
| Bank5Connect | $0 | 4.6 |
Withdrawing and Depositing Cash
According to the GOBankingRates survey, 40% of Americans go to a physical bank branch to cash or deposit checks. In addition, 38% bank in person when they need to make large cash deposits. Making these transactions in person can also add an extra layer of security.
One of the most compelling advantages of online banking is the access to high-yield savings accounts. Unlike traditional brick-and-mortar banks, online banks have lower overhead costs, allowing them to offer higher interest rates on savings accounts.
The fintech firm Galileo found that 65 percent of consumers use traditional banks for their primary bank accounts, while JD Power reports that 27 percent primarily use online banks, as of 2022. However, of the 65 percent using traditional banks primarily, 77 percent said that they keep some of their funds elsewhere.
Some online banks participate in ATM networks. If your online bank is one of them, you can deposit cash at the closest ATM. Once you've found an ATM, take your cash to the ATM, fill out a deposit slip with your account information, and put the money into the deposit envelope.
The short answer is no. Banks cannot take your money without your permission, at least not legally. The Federal Deposit Insurance Corporation (FDIC) insures deposits up to $250,000 per account holder, per bank. If the bank fails, you will return your money to the insured limit.
| Bank NameBank | CityCity | Closing DateClosing |
|---|---|---|
| Citizens Bank | Sac City | November 3, 2023 |
| Heartland Tri-State Bank | Elkhart | July 28, 2023 |
| First Republic Bank | San Francisco | May 1, 2023 |
| Signature Bank | New York | March 12, 2023 |
When banks fail, the most common outcome is that another bank takes over the assets and your accounts are simply transferred over. If not, the FDIC will pay you out. Funds beyond the protected amount may still be reimbursed, but the FDIC does not guarantee this.
As of 2022, 78% of adults in the U.S. prefer to bank via a mobile app or website. Only 29% of Americans prefer to bank in person.
What are 3 pros and 3 cons of online banking?
The Bottom Line
Trading your brick-and-mortar bank for an online checking account has pros and cons. The pros include higher yields, lower fees, and high-tech features that help with account maintenance and budgeting. The cons include more difficult access to customer service, as well as online security concerns.
- Lower accessibility (more strict KYC/AML requirements). ...
- Inability to do business with some countries;
- Potentially outdated online banking;
- Longer time needed to open accounts;
- Banking must take place during business hours;
- Potentially higher monthly fees;
- Clients have to deal with a lot of bureaucracy.
- Password-protect all banking access. ...
- Choose strong and unique passwords. ...
- Enable two-factor authentication. ...
- Log out when you finish banking. ...
- Avoid public Wi-Fi. ...
- Don't use a shared computer. ...
- Sign up for banking alerts. ...
- Guard against phishing scams.
Risks of mobile banking
The 2021 Nokia Threat Intelligence Report indicated that 50% of banking malware is targeted toward Android users, because Androids run on a fully open-source operating system. Cyberattacks triggered by hackers, unexpected glitches, and user mistakes can all undermine an app's security.
The FDIC provides insurance for the funds that you deposit in FDIC-insured banks. This means that, if your FDIC-insured bank fails, the FDIC will protect you against the loss of your insured deposits whether the bank is brick and mortar or online-only.
