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Answers to Commonly Asked Questions About Internet Banks

Managing one’s money is one of the most important aspects of a person’s life. But these days, it’s becoming a hassle to go to the bank to do your transactions. With busy schedules, more people are looking for more convenient solutions to an old problem. That's where online banks or Internet banks come in—they're all about making your financial life simpler and more convenient.  

What is an online bank?  

Also called internet banks or digital banks, online banks are banks that don't have physical locations. You can only open an account online and conduct all your transactions online.  

How do online banks differ from traditional banks?  

Traditional banks are banks with physical locations. Many traditional banks have also evolved to cater to their customer's needs online by offering their own online banking websites and apps. However, many of their other services require the customer to visit their physical locations.  

What are the advantages of using online banks or Internet banks?  

There are many reasons why online banks have been getting traction in the past few years.  

  • High interest rates. Because they don't have physical offices like traditional banks, they have low operation fees which means they can pass on the savings to the customers via attractively high interest rates.  
  • Low fees. They charge lower service fees and require a lower maintenance balance. It also costs less to open an online bank account.  
  • Innovative banking features. Many online bank companies invest a hefty sum in keeping their customers' peace of mind with top-of-the-line online banking innovations. They are more likely to provide the latest features that can help their customers make financial transactions online as convenient and easy as possible. For example, some banks have expense trackers or offer savings subaccounts.  
  • Focus on customer service. Because they don't have to focus too much on running actual physical branches, they can put their efforts on giving excellent customer service.  
  • Very convenient. As a user, you will be able to do your banking online anytime, anywhere. 

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What are the downsides of using an Internet bank or online bank?   

Like many other things, online banking has its own disadvantages. You need to know these so you can accurately decide whether or not this banking option is for you. 

  • Hard to find ATMs. Most traditional banks have a huge network of ATMs you can withdraw cash from when you need them. This is not true of most online banks that don't have widespread ATM services yet. But before you make this becomes your deal-breaker, just know that many internet banks pay you a certain amount of money every month to shoulder the ATM fees that are charged by other banks. Convenient, isn't it?  
  • It can be hard to make deposits. Check out this Experian guide on ways you can deposit money to your online bank account.  
  • Some services may be limited. If you're looking to take out huge loans like home or business loans, the best options are still among traditional bank options.  
  • Scam risk. As with anything digital, there is always the risk of fraud and online scams. So be very careful about keeping your account personal and private.

Related: 10 Clever Money-Saving Hacks to Supercharge Your Budget

What should I look for when choosing an online bank?  

  • Consider what you want to use the bank for. Are you interested in their loan products? Low fees? High interest rates? Know what you need it for before selecting an online bank.  
  • See which online banks operate in your country.
  • Make sure it is FDIC-insured. This protects your money in case the bank fails.  
  • Check if the website URL has "HTTPS" which means the site is secure.  
  • Look out for strong security features.  
  • Get quotes from different banks to compare their costs.  
  • Find out how robust their ATM networks are.  
  • Read about their quality of customer service. You want a bank that can help you in the event that there's any issue on your end.  
  • Read reviews from other people who have engaged with the bank.  
  • Read reviews about how user-friendly their apps and websites are.  
  • Research their available money management tools. There are online banks that offer features that help their depositors budget and build their savings.

What do I need to open an online bank account?  

To open an online bank account, you will need to submit identification documents such as your driver's license or any government-issued ID.  

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Related: 10 Clever Money-Saving Hacks to Supercharge Your Budget

  

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