Just about every adult has at least one bank account. This is how we pay bills, save up for big purchases and prepare for a rainy day. A bank account is by far the easiest and safest way to keep tabs on your money, and since there is a bank on practically every corner, finding the right place for your money shouldn’t be difficult.
But although local banks may be a common landmark in your area, these aren’t your only option. You have choices with regards to banking. Sure, local banks may be conveniently located close to your house, and the banks in your area may have a good reputation. But if you’re looking to get the most out of your banking experience, online accounts are worth consideration.
Most brick-and-mortar banks – large and small – offer online banking, which lets account holders manage their funds from a computer or smart phone. They can transfer funds, deposits checks and pay bills from a computer. But despite the availability of online banking offered by traditional banks, there has been a rise in online-only accounts over the past few years.
Online-only checking and savings accounts offered by Internet banks have certainly changed the way some manage their finances. According to the research firm, Novantas, deposits for online-only banks rose to $364 billion in 2012 – a 32% increase from 2010 and a 400% increase from 2004. As more people explore their options and experiment with Internet banking, many question whether online accounts will eventually kill local banks.
Granted, there will always be those who prefer the comfort of a physical bank branch. But realistically speaking, bank fees aren’t getting any cheaper, and many brick-and-mortar banks can’t afford to offer the best rates on checking and savings accounts.
There are three main reasons why customers choose Internet-only banks. Unlike most local banks, Internet banks offer a variety of free services, such as free checking and free savings accounts. Compare savings and checking options with a local bank, and you will find monthly maintenance fees between $5 and $15, depending on the account features. Plus, with an online account, you do not have to change banks if you relocate to a different area.
Online accounts have also caught the eye of customers because they tend to offer better interest rates on savings accounts. In fact, the average savings account rate at Internet banks is about five times higher than traditional banks, says MoneyRates.com. Internet banks have substantially lower overhead costs. There are no branches to maintain, nor do these banks require tellers. This results in lower fees and better rates. This is a smart move for anyone looking to take their savings accounts to the next level. And since interest-checking is a feature offered by several Internet banks, there is more than one opportunity to grow your money.
So, will online accounts kill local banks? Only time will tell. But as customers hunt down the best interest rates and look for ways to escape hidden bank fees, local banks may lose their appeal.