In this video, I wanted to provide an intro to online banks, how they differ from traditional brick and mortar banks and who these online banks are for. Disclaimer: this is not financial advice, it’s just me sharing my experiences with these products.
Time Stamps ⏱
Differences Between Online and Brick and Mortar Banks - 0:35
How Online Banks Differentiate Themselves Through Technology - 3:00
Online Bank Examples: Digit for savings - 4:00
Online Bank Examples: Simple for budgeting - 4:20
Online Bank Examples: High Yield Savings Accounts - 4:39
Getting Money In and Out of Online Banks - 4:51
Depositing Cash into Online Banks - 5:31
Getting Money out of Online Banks - 6:00
High Yield Savings Accounts at Online Banks - 7:58
Who Are Online Banks For? - 8:56
Conclusion - 9:30
What is an online bank?
Function wise, they’re the same as traditional brick and mortar banks. The main difference though, is that online banks do not have physical branches. While this may seem like an immediate disadvantage to some, I’ll come back to this later in the video and explain how it’s really not that big of a deal.
Another difference between online and traditional brick and mortar banks is the user experience. Since online banks don’t have physical locations, that means they have to nail their user experience, whether it’s through their website or their mobile phone app. This means you’ll also see a lot of online banks that offer interesting technology solutions that help you manage, budget and save your money.
Online banks have their niches
A lot of online banks differentiate themselves through the technology they use or the user experience they offer.
For example, let’s say you want to find a way to automate your savings with an online bank. Banks like Digit have built technology that analyzes your spending and helps you find ways to save.
If you’re really into budgeting, Simple has made this exceptionally easy with their goals feature. Simple lets you create a goal for just about anything and allocate the balance in your checking account to those goals so that you have a clear picture of where your money is allocated and what you have available to spend.
If you just want a place to hold your savings, most online banks offer extremely competitive interest rates that you would not find at your traditional banks.
If there’s no physical locations, how do I get money in or out?!
This is a common question when I talk about online banks. HOW DO I DEPOSIT MONEY?
Most online banks support direct deposit, so if that’s your main method of getting paid, that’s taken care of. Most of these banks also have some sort of mobile check deposit, so if you get paid with paper checks, you have that option as well. The tricky part comes when you try to deposit cash.
Here’s how I get around that. I still have an account with a traditional bank so if I need to deposit cash, I can do it there. Then I can transfer that to my online bank if it needs to go into a savings account.
ATMs
When I just had a traditional bank, I never really used ATMs to withdraw money. I usually just used the to deposit.
The great thing about online banks is that most are part of an ATM network where can withdraw money fee free. Additionally, a lot of these banks offer ATM reimbursements, meaning you can use any ATM in the US and the bank will reimburse those fees at the end of the month.
Some banks like Charles Schwab, offer a checking account that provides customers with unlimited ATM fee rebates WORLDWIDE.
SAVINGS
For me, where online banks usually come in clutch is with savings. Online banks generally offer more favorable interest rates on savings accounts as compared to traditional banks. This is because of the overhead they’re saving by not having branches.
Who is an online bank for?
They are for anyone really and if you’re someone who’s been wanting to be more active with your finances and change the way you bank, you have plenty of options. Whether its taking budgeting to a new level, leveraging technology to help you kickstart your savings or just finding a place for your savings to sit where its earning you SOMETHING, online banking is a way to go.
Here are the links to some of the online banks I mentioned:
Chime - chimebank.com
Simple - simple.com
Digit - digit.co
Charles Schwab - schwab.com
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