Why should you open an online checking account?
Here are some reasons why you should consider opening an online checking account:
- Usually, no overdraft fees: If you don’t want to risk overdrawing your account and getting hit with a fee, most online banks don’t charge a fee if you accidentally spend more money than is available in your account.
- Usually, no ATM fees: Online banks partner with other financial institutions, so you can use their ATMs at no cost to you. In addition, some large banks will reimburse you for ATM fees charged by other banks, and some online banks don’t charge their customers any fees for using out-of-network ATMs.
- Accessibility: With a traditional checking account, you’re generally limited to your local bank or credit union’s branch locations. Not so with an online account. You can use ATMs, send money and make deposits from anywhere. Most online banks offer an extensive network of surcharge-free ATMs, and many will reimburse you for any ATM fees charged by other banks. Many online banks also have apps that let you manage your accounts, pay bills, and deposit checks using your smartphone or tablet.
- Better interest rates and lower fees: Online checking accounts usually offer higher interest rates than traditional ones because they don’t need to support physical branches and their associated overhead costs. That can help your funds grow faster when they’re not in use. Since online banks don’t bear the cost of maintaining brick-and-mortar branches, they can pass the savings along in the form of lower fees. Some even offer free checking with no minimum balance requirements.
- Digital customer service: Online banks focus on providing excellent service over an accessible web interface or smartphone app, not a physical location where you can talk to someone face-to-face.
- Security: Online banking is extremely secure because of built-in encryption for all transactions and information stored in your account. The biggest risk comes from falling for scams that appear to come from legitimate sources but are intended to steal your identity or money.
What do you need to open an online checking account?
Opening a checking account online is simple and should take less than 10 minutes. You need to provide some basic information about yourself and be at least 18 years old. The information you may be asked for includes your name, address, and Social Security number. You’ll also need a valid form of identification, such as a driver’s license, passport, or identification card.
How do you withdraw and deposit cash with an online checking account?
Every online bank provides multiple ways to get your money into and out of your account. The best options depend on how much cash you have to deposit or withdraw.
Deposits
Deposits can be made in various ways:
- ATM deposits: It’s possible to deposit cash at some ATMs. Some banks’ ATMs are part of networks that are free for customers.
- Mobile deposits: You can make mobile check deposits with apps from many banks.
- Using a teller: Online banks that are part of larger banking organizations also have a network of branches where you can make deposits and withdrawals. But there might be fees if an online-only bank holds your account.
Withdrawals
Online checking accounts usually come with a debit card that you can use to withdraw money from any ATM. You can also visit a branch of your bank or one of its partners if it has any. Online banks also have come up with apps that can make it easy to access your money through digital transfers.
What are the common online checking account fees?
Here are some of the most common fees you might encounter with online checking accounts:
- Minimum balance fees: Some traditional banks will charge you if your balance drops below a certain amount. An online checking account is typically more flexible when it comes to minimums.
- ATM fees: Many online checking accounts have free ATM networks or reimbursements for ATM fees.
- Monthly maintenance fees: Monthly maintenance fees are common with traditional banks but less with online banks. You may be able to waive some or all monthly maintenance fees by maintaining a certain minimum balance in the account or opting out of paper statements and signing up for e-statements instead.
- Overdraft fees: If your bank lets the transaction go through, it may charge an overdraft fee for each overdraft transaction.
- Stop payment order fee: This is a common checking account fee that occurs when you request that your bank stop a check from being processed.
Are online checking accounts safe and trustworthy?
Online checking accounts are not different from traditional checking accounts at big banks. You deposit money, get a debit card, and earn interest based on your balance. The only real difference is that online checking accounts operate entirely online.
Online checking accounts are as safe as their traditional counterparts. Most are insured by either the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA), which protects deposits. While all FDIC-insured institutions must follow certain rules and guidelines to receive coverage (and some exceptions), the FDIC covers bank accounts up to usually $250,00.
Do online checking accounts offer debit cards?
You have to check with the bank if they offer debit cards, but most online institutions will provide a debit card. Some banks will offer debit cards linked to your checking account only, and others will offer a Visa or Mastercard debit card. The benefit of having a Visa or Mastercard debit card is the ability to use it at any online retailer and not just the bank’s ATM.
Most online banks will also require you to use a secondary bank for ATM withdrawals from your online checking account because they don’t have their physical branches.
How to choose the best online checking accounts
Here are some factors to consider when choosing an online checking account:
- Interest rates: Some accounts offer competitive interest rates, but you usually have to meet certain requirements, such as making a certain number of transactions per month or keeping a minimum balance. If you can’t meet the requirements, you won’t earn any interest.
- Minimum balance requirement: Some checking accounts charge monthly fees if your balance falls below a certain amount. If you tend to keep a low balance, make sure to choose an account with no minimum balance requirement
- Transaction and withdrawal limits: Online banks often limit the number of withdrawals and transfers you can make per month. If you regularly exceed these limits, choose an online bank that doesn’t place restrictions on your transactions.
- Fees: Make sure you know the fee structure. Sometimes you can avoid certain fees by keeping certain balances or performing certain tasks such as direct deposit or setting up automatic payments.
- ATM access: Not all online banks reimburse ATM surcharges or provide access to the same national networks of ATMs. Make sure that your choice has locations convenient for you.