Online Banking and Business: When Does it Make Sense to Use a Digital Bank?
When you think of checking accounts, savings accounts, loans, and money management, you likely think of the traditional brick and mortar bank. However, as you likely already know, banking has changed in the last few years. With websites and mobile apps, trips to the bank have almost become obsolete. Instead, you can manage your money, pay bills, and apply for a loan with the click of a few buttons.
Not only has how we bank changed, but banks themselves have changed. These days there are banks that are entirely digital. Digital banks operate entirely online and don’t have any physical branches.
Want to learn more about digital banks? Here’s what you need to know when deciding if it makes sense for you to open an account or loan with a digital bank.
Which Online Banks Are the Best?
There are several online banks to choose from. One of the top options is CIT Bank. CIT Bank is a top 50 U.S. bank that exists to empower people to empower their savings, their business, and their communities. The bank offers personal, business, and commercial accounts depending on your specific needs. With CIT Bank you’ll find flexible, short-term, and long-term solutions that will help you to reach your financial goals.
Want to learn more about this online bank? Check out this recent CIT Bank review to see what current account holders have to say.
Other well-known online banks include Ally Bank, Discover Bank, and Synchrony Bank.
When to Make the Switch
After years of using the same traditional bank, you may be hesitant to switch to an online-only bank. But, there are many benefits to using online banking, many of which will save you money now and in the long run. Here’s what you should know.
Quicker Money Growth
Saving money is an important part of financial security. But, as you may have noticed, some of the most popular banks offer extremely low rates of interest, especially on checking, savings, and money-market accounts. Chances are you’re making very little money on the money that you do have stashed away.
If you’re looking to grow your money quickly, consider an online bank. Online banks typically offer much higher interest rates on checking, savings, certificates of deposit, and money-market accounts. This is because online banks don’t have shareholders that want big dividends. They also don’t have to pay for the expenses of running brick and mortar locations.
One of the most frustrating parts of using a traditional bank is the variety of fees that you can get hit with. Some of these fees can cost more than hundreds of dollars! Typical fees include:
- ATM fees
- Monthly maintenance fees
- Overdraft fees
While fees frustrating for you, it’s more money that goes into the bank’s pocket. According to MoneyRates.com, monthly maintenance fees have continued to increase. The average monthly fee equals around $162.96 per year. ATM fees have also increased in recent months.
MoneyRates.com also noted that the average online checking account has a lower fee than the average brick-and-mortar bank account.
With an online bank, you rarely have to worry about an increase in overdraft fees, ATM fees, and monthly maintenance fees. This is a huge benefit if you want to minimize the amount of money that you pay in fees each year.
Better Loan Rates
No matter what type of loan you’re seeking, it’s always best to shop around for the lowest interest rate and the most favorable loan terms. Just as credit unions tend to offer better loan rates, the same can be said for online banks as well. You can expect to receive low rates on auto loans, mortgages, and even personal loans.
What You Should Know About Online Banks
Just as your money is protected through a brick and mortar bank, it’s also protected with an online bank. When choosing an online bank, be sure to choose one that’s federally insured. This way you can have the peace of mind that $250,000 of your money is fully backed by the FDIC in the event that the bank goes under.
Online banks also offer the same features that you’ll find with a traditional bank. For example, most online banks allow account holders to:
- Check account balances
- Transfer money between accounts
- Pay bills
- Set up automatic payments
- Transfer money to someone
The only difference is that with an online bank, you won’t be able to interface in person with a teller. Instead, there’s likely a dedicated phone, email, or chat-based support team that’s available to help you.
There’s no wrong or right reason to make the switch to a digital bank. But if you’re looking to pay less in fees and enjoy more favorable interest rates, you definitely want to consider the many other perks of switching to online banking.
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