Big banks have gotten a bad reputation over the last decade or so, as customers are increasingly facing higher fees and less than stellar customer service. Not only that, 78 percent of Americans still blame big banks for the financial crisis, according to a 2014 consumer banking study conducted by Harris Poll.
Online banks, by contrast, are becoming more appealing, especially among the millennials set who overwhelmingly prefer to manage their money virtually. Switching over your accounts can be a hassle, but it’s worth it if you find the right bank. If you’re tired of your big bank but you’re still on the fence about committing to going online-only, these four reasons can help you decide.
1. You’re tired of fees
Free checking accounts are quickly going the way of the dinosaurs and finding a bank that doesn’t impose at least one fee is near impossible these days. When you’re considering opting out of your big bank, you want to look at how much of a difference it’ll make in terms of the fees before you make a move.
If you’re paying a monthly service fee, for instance, you should check to see if there’s any way to avoid it. You may be able to side step the fee by setting up a recurring transfer between your checking and savings account or using the online bill pay service. You also want to consider things like overdraft fees, statement fees and ATM charges to see how they compare to your online options.
Online banks usually have the advantage, since they have lower overhead costs which means fewer fees. Certain banks, like Ally, will even reimburse any ATM fees you’re charged each month, which is a perk big banks don’t normally offer. If you’re constantly getting nickel and dimed by your big bank because of strict account minimums or excessive service charges, online banks look a lot more appealing.
2. You want to earn more on your savings
If you’ve got a checking and a savings account at your big bank, chances are you’re earning a dismal amount of interest. Again, it all goes back to the higher operating costs that big banks face. Online banks tend to offer slightly better rates because it doesn’t take a huge bite out of their budget to do so.
Taking a look at what rates online banks are currently offering can give you an idea of how much greater the potential is for your money to grow if you decide to make the switch. MyBankTracker makes it easy to compare rates and review minimum deposit requirements for savings and money market accounts so you’ll know exactly how much money you need to earn the most interest possible.
3. You don’t need to make a lot of cash deposits
A number of online banks offer mobile deposit, which allows you to scan in checks from your smartphone. It’s a no-muss, no-fuss way to put money in your account without having to go to a branch but what happens when you need to deposit cash? While there are a few online banks that allow you to make cash deposits at certain ATMs, most require you to put money in your account via direct deposit, mobile deposit or wire transfers.
One way to get around dealing this problem is to use an app like Venmo, which lets you send and receive bank transfers through your smartphone. If you’re out with friends, for example, and you cover part of someone else’s tab, they can just send the money straight to your account instead of handing over the cash. It cuts out the need for a local branch and it makes keeping up with who owes you money a little easier.
4. You already do most of your banking online anyway
Taking advantage of mobile and online banking services saves time and it’s become the most popular way for people to manage their accounts. A 2013 survey from the American Banking Association found that 31 percent of respondents did their banking through the Internet, compared to 21 percent who preferred to handle their accounts in-person.
If you’re already doing things like checking your balances, transferring money and paying your bills on your phone or laptop, then leaving your big bank behind shouldn’t be much of a stretch. The most important thing is to compare how the online bank’s mobile features stack up with what you’re currently getting from your big bank.
It’s also a good idea to see if there are any fees involved. U.S. Bank, for example, charges a $0.50 fee for mobile check deposits. If the online bank you’re considering offers completely free mobile services, that’s another incentive to transfer your accounts.
If you plan on shopping for a mortgage in the future
Millennials by and large are waiting longer to buy homes but if you’ll soon be shopping around for a mortgage, moving to an online bank doesn’t have to throw a wrinkle in your plans. However, while some online banks offer home loans, not all of them do. Ally, for example, got out of the mortgage business for good in 2013.
There’s no rule that says you have to borrow from your current bank if you’re planning to buy a home or a new car. In fact, a recent Consumer Financial Protection Bureau report found that nearly half of borrowers don’t shop for a mortgage. It’s important to compare interest rates in your area when shopping around for a mortgage.
Remember, there’s no one size fits all when it comes to finding the right bank. Assess your needs and lifestyle first, and when you’re ready, why not try and online-only bank? Remember that MyBankTracker has a list of the best online banks to help you choose.