Online Banking - Check out now
Online Banking – Check out now
Today, you can do most of your banking on your smartphone or computer, and many banks even allow you to deposit checks remotely—perhaps weeks or even months since you last set foot in the bank. But traditional bank accounts are still tied to brick-and-mortar stores, while online banking—while offering nearly all of the same services—is not.


Is online banking a safe place to store emergency funds? Will they pave the way for your financial independence? We give you an overview of the basics of online banking savings and checking accounts that experts think are the future.

This is how online banking works

An online-only bank account may sound very futuristic, but most of our banking is already done over the internet. Aside from a few small changes, the way you use your money every day — checking your balance, transferring funds between accounts, paying bills or sending checks — remains the same.

“A lot of people have the misconception that you need an extra bank account,” says Kimberly Palmer, credit card and personal finance specialist at NerdWallet. “But in reality, a lot of people just rely on an online-only account.”

Internet Banking and Cash

Choosing to bank online doesn’t mean saying goodbye to the crispy $20 bill forever.

“These banks have ways to make sure you have access to your cash,” Palmer said. “Most are associated with ATM or ATM networks.”


Palmer said these ATMs are generally easily accessible to most people and are clearly marked on the physical machine as your particular online bank’s network. (Your online banking application may also provide a way to locate an ATM on the web.)

Personal finance writer Stefanie O’Connell says most online banks will also refund any ATM withdrawal fees outside your network. To avoid this, some people opt instead to deposit cash in a traditional bank account and then transfer it to their online bank account. These transfers are usually free unless you want the money on the same day. (Transfers may take several business days.)

“It adds another step,” O’Connell said. “It takes into account your needs.”

Is online banking safe?

In short, online banking is as safe as traditional banking. To make sure your bank is legitimate, look for an FDIC-insured bank so you can rest assured that your rainforest money isn’t going anywhere.

“This is the government’s support for any bank that says we will insure up to $250,000 per account and insure your deposits with the institution,” O’Connell said.


According to Palmer, FDIC (Federal Deposit Insurance Corporation) insurance is clearly marked on the homepage of online banking.

Is Internet Banking Right for You?

The decision to open an account with online banking is a matter of personal preference.

“If you like to walk into your bank and talk to your teller, you’re not going to get that in an online-only bank,” O’Connell said. “You should consider this compromise.”

Likewise, questions about applying for a mortgage or auto loan or personal loan must be answered over the phone. (And you’ll have to find another place to exchange your change.) But like traditional banks, Palmer said, online-only banks also offer 24/7 customer service over the phone and online.

Another downside is that not all online banks offer credit cards.

“The online-only experience is still very fragmented,” O’Connell said. “I think brick-and-mortar retail has the advantage of being a one-stop shop.”


The biggest advantage of an online-only account is the high interest rate and low (or no) fees on your savings account. Online banks can provide these benefits because they don’t have to pay overhead, so savings are passed on to account holders, O’Connell said. Most traditional banks offer a standard rate of 0.1% on savings accounts, while most online banks offer rates of 2.0% and above, she said. (A Fed rate hike or cut could affect savings account rates accordingly.)

“It’s a huge difference,” O’Connell said. “They basically let [accounts] make money automatically, with little to no risk.” As far as personal finance techniques go, that’s a pretty good one.

Palmer adds that you may not have to pay minimum balance fees at online banking, which is great for teens and young adults who are just starting out with modest accounts to build credit or get used to thinking about financial goals. Some online banks also advertise no overdraft fees.

Skeptical about online banking? You can open one at any time to earn interest income while keeping your traditional account open. You can close your original account when you’re ready to make a full switch.

Bank of the future

Whether you’re ready to take the plunge or not, this banking solution appears to be the way forward, Palmer said.

“Young people, in particular, are increasingly inclined to only offer online services, including banking,” she said. “And into adulthood, they’re likely to maintain that level of comfort.”

Gen Z, especially 18- to 22-year-olds, are now the most likely to have an online-only bank account, Palmer said. This percentage declines with age, meaning baby boomers are less likely to have online bank accounts.

Even with that in mind, Palmer said she still offered her a traditional bank account when they opened one for her 9-year-old daughter this year.

“I wish she had the experience of walking into a bank and giving her cash as a deposit,” Palmer said.

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Jake Smith

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Jake Smith

He is the editor of Eragoncred. Previously, he was editor-in-chief of Eragoncred and a financial industry reporter. Jake has spent most of his career as a Digital Media journalist and has over 10 years of experience as a writer and editor.