The internet has made the front end business of retail a lot less expensive. They no longer have to pay for shelf stockers, clerks, cashiers, managers, shelf space, utilities and the like. They can all do this through a simple web front now. Because companies can save so money when selling their products, they can give consumers a much better deal sine they don't have to pay for all of that overhead. One of the places that has taken advantage of this is banks. Many of them offer very lucrative online savings account which offer rates of over 5% (where are you going to find that at a local bank?!). They sound good, but are they safe to use? Are there any disadvantages? Let's find out.
You can easily get about 5% on your money through all of the major competition in the online savings account arena. Most traditional banks return about 2% on their money, the interest rates are absolutely amazing online. With an online bank you can do your banking whenever you want, all you have to do is hop online and do any transactions that you need to. Since you are banking online, you can even do your banking while you are on vacation without having to worry if there is a local branch.
A lot of the online banks are FDIC insured. This is a nice feature for an online savings account that you're not 100% sure about. This means that if something were to happen to the bank, the Federal Reserve would refund the first $100,000 of your savings account to you, which is more than enough for most people. If the economy were to totally tank and we found ourselves in another great depression, the Federal Reserve couldn't possibly pay for everyone's accounts, so in that case FDIC insurance wouldn't matter a whole lot.
There are also some disadvantages too, so you should carefully consider the good and bad parts of banking online before making the move. You lose any instant access to your savings account, you can't just walk down to the bank and withdraw money anymore, you have to make a transfer to your checking account which will take a couple of business days. You will also no longer have the option of skipping out on ATM fees, however some of the online banks will refund ATM fees from other banks, so it's like you are getting to use the ATM for free! There can also be some issues with customer support, there are no tellers to walk into the local branch and get help from, instead you have to rely on the 800 number they provide you. It's usually a pretty hit or miss situation with customer service online.
Hopefully this article will help you decide whether or not banking online is a viable alternative to the more traditional savings account.