Pros and Cons of Online Banking

Mobile service

Furthering the convenience factor, I can bank on my iPhone. Not all online banks offer this service but one of my favorite banks (ING Direct) does.


Since online banks don’t have branches you can easily waltz into, they have to insure that their online interface is full of services you need. These may include budgeting, loan calculators, and equity trading platforms. They may also offer free online bill paying, checks, online tax forms, and tax preparation.

Superior rates

The lack of significant infrastructure and overhead costs allow direct banks to pay higher interest rates on savings and charge lower mortgage and loan rates. Some offer high-yield checking accounts, high-yield CDs, and no-penalty CDs for early withdrawal. Some accounts can be opened with no minimum deposits (Ally Bank) and carry no minimum balance or service fees.


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Cons of banking online

Not everything is peaches and sunshine where it concerns online banking. There ARE a few negatives:

A lack of a relationship

It’s difficult to have a “relationship” with an online entity (unless you’re really weird). I can remember my father having a great banking relationship with his banker to the point that my father could buy a car, write the check for it over the weekend, and later call his banker who would tell him, “I’ll make sure the check is covered. Just come in next week sometime and we will get the paperwork filled out.” Without that relationship, nothing like that could happen.


Traditional banks can offer their most loyal customers certain services that online banks cannot. These could include certain types of insurance, preferred rates on CDs or loans, or investment advice at no charge (get great investment advice with WiserAdvisor).

Difficulty handling complicated transactions

Let’s face it, there are times you need to meet face to face because a transaction is complicated. Last winter my wife and I had to deposit an insurance settlement check and it required my mortgage company’s signature as well as mine and my wife’s – and those signatures had to be verified by my banker. That would be extremely difficult if we banked solely online.

How to overcome the small negatives of online banking

Well, there’s no way to overcome the lack of a relationship, the variance in services offered, or the difficulty in handling complicated transactions unless you have both a traditional account AND an online account. But that isn’t necessarily a bad thing – Perkstreet even recommends it.

Some traditional banks may waive their monthly fee (fees are ridiculous anyway), if you have one direct deposit per month. The way I overcome this is to have my employer spilt my payroll direct deposit so that my mortgage payment goes into my traditional bank and the balance goes into my online bank. My mortgage is held at my traditional bank so it makes things doubly easy.

Internet banks have done a lot to increase the competition for your business. Both online and traditional banks offer their own unique benefits as well as their drawbacks so it may be wise to split your banking between the two. That way you get to enjoy the best of both banking worlds — the conveniences and savings of internet banks and the customer service and personal relationships of a grounded bank.