Online banking has grown to become a routine option for conducting financial transactions. It’s fast, easy and convenient. The ability for individuals and businesses to manage their finances through the web has transformed the banking industry and has enabled people to have 24/7 access to accounts.
However while there are notable advantages to Internet banking, this does not mean the practice doesn’t come without some drawbacks as well. Privacy and security are notable concerns and unfortunately cyber crime is a reality as hackers target both businesses and individuals in an attempt to snare access to accounts.
Before making the decision to do online banking it is a good idea to educate yourself on the pros and cons of online banking this way you can make an informed decision of whether or not to open an online account.
Pros of online banking
Internet banking isn’t for everyone, however there are many advantages for those who do opt to conduct transactions online. Here are a few of the advantages:
• Convenience and accessibility
One of the greatest benefits of online banking is the 24/7 availability to access accounts. There is no need to be limited to traditional ‘banker’s hours’ because you can log on at any given hour and make transfers, check balances, track deposits and payments, or view other account activity. With Internet banking all account information is stored in a consolidate place right on the bank’s server and can be accessed by via computer. Internet banking eliminates the need to physically travel to the bank.
• Fast processing of transactions
Electronic transactions are far faster than using traditional paper to do banking. With automated deposits and online bill pay, it is easy to set up schedules to do banking with no worries about lost checks in the mail or extended time to make deposits.
• Better watch on finances
Online accessibility to bank accounts allows you to keep a better watch on finances. If accounts are lower than your comfort zone and you have checks needing to be cleared, you can transfer monies any time of the day.
Another benefit is the ability to monitor accounts more closely to watch for fraud is afforded because users can log on and check as often as they’d like. In this respect if any fraud is occurring, it will be caught a lot sooner than waiting for a monthly bank statement. Additionally many banks provide the option to sign up for fraud alerts to email, and any shady activity can be spotted quickly.
• Lower fees
Often online banks can offer lower fees or higher interest rates because they have reduced operating overhead by needing to maintain physical branches of banks. In this respect, in some instances, the bank may pass these savings to customers as a way to augment their customer base.
Cons of online banking
While benefits of online banking are numerous, there are some drawbacks to be aware of if considering opening an online account or adding this option to brick-and-mortar banking. Here are a few of the disadvantages:
• Less personal interaction at the bank
One of the largest benefits associated with traditional banking is you get to know who you’re dealing with and they get to know you. Often you might need a contact at the bank to talk to if you have an issue and if you’re strictly banking online, it may pose a challenge. Aside from the fact that nothing truly replaces a handshake and eye contact when talking business. With face-to-face transactions, your bank is not going to view you as an anonymous account number, you’ll be seen as a regular customer the minute you walk in the door.
• Hacking
Unfortunately hacking is a reality associated with electronic transactions. If you are going to start online banking, you may boost the risk of your accounts getting hacked. This is not to say doing face-to-face only banking is guaranteed safety since the banks themselves can have data breaches, but by not doing the transactions from home does eliminate that middle step of electronic movement of money.
• Service reduction
Banks that are rooted in online banking may not offer the same wide ranges of services a brick-and-mortar bank might. Traditionally banks offer complimentary services such as notary, brokerages and personal review of accounts, to name a few, to see if you’re getting the most from your accounts; online banks may not be able to afford this option.
• Dealing with checks/cash
Those who have made the transition to completely electronic financial management likely won’t have an issue, but those who still deal in paper checks and/or cash may become frustrated on how to contend with paper transactions since there is no customer service counter to visit if belonging to an online bank only.
Pros and cons aside, online banking is here to stay. At this point in time consumers are fortunate enough to be able to choose what type of banking they prefer, but over time this may change. Whatever you decide, it is a good idea to become familiarized with fee structures, operating procedures and policies before investing in any bank. When it comes time to decide whether or not to add an online component to your banking needs, it is a good idea to understand the pros and cons first.