22 Online Banking Pros and Cons

As the world moves away from being a primarily cash-based society, digital transactions from purchase to account management become the new normal. This includes online banking. Many banks, credit unions, credit cards, and other financial institutions allow consumers to manage their accounts conveniently on smartphones, tablets, or PCs. As with any new normal, there are many advantages to be considered, but there are disadvantages that must be evaluated as well.

Are you thinking about transitioning to an online banking platform for your financial needs? Then here are a few of the key points to consider.

What Are the Pros of Online Banking?

The primary advantage of online banking is that it allows for 24/7 access to your account information. Consumers can transfer funds from one account to another, have access to their transactional history, or even apply for new credit lines at their convenience. Instead of waiting for the financial institution to open, consumers can get instant updates on their time. Here are the other advantages.

1. Statements go paperless.
The IRS recommends that small businesses keep up to 7 years of paperwork on hand in case of an audit. For a sole proprietor, that means having 7×12 paper statements that all have information on them that could be used for identity theft. Online banking doesn’t completely eliminate the risk, but it minimizes it. Add to the fact that paper isn’t being used any more to help the environment and this is a win/win for man.

2. Many platforms offer automatic payments.
Many people pay their bills once or twice per month after they receive a paycheck. This is a process that may take hours. From logging into payment websites to writing checks to running to the post office to get stamps, it is a less than convenient process that is 100% mandatory. Automatic payments can often be setup through online banking platforms so that bills get paid every month even if an ACH transaction isn’t started through the provider.

3. Online banking can often be synchronized to financial software.
The key to a successful budget is through the monitoring of financial transactions on each line. Are you within your allotted amount for fuel for the month? For groceries? Has the utility bill spiraled out of control? Because online banking platforms can sync up to personal finance software being used, it’s easier to stay on budget because adjustments are made in real time. You’ll always know where you stand and what you need to do.

4. Balance alerts can be created.
The problem with going over a balance isn’t that you missed a budget estimate. It’s the fact that there are generally fees associated with a balance that is too low. Setting up alerts that will let you know when you’re approaching your limits can be very helpful in managing your finances. You can even create alerts to let you know of specific transaction types that occur if you’re concerned about personal spending habits.


5. They help to manage the mundane tasks of account management.
If you’ve ever spent 30 minutes on hold trying to reorder checks, the 30 second request form through online banking is a definite blessing. Scheduling transfers happens in seconds. Many online platforms will even allow account holders to view check images to make sure something has cleared.

6. There is always some type of access anywhere there is an internet connection.
Whether you’re on a private or a public computer, you’ve got access to your banking as long as you’ve got access to the internet. This allows for worldwide access to account information if needed, making it easier and cheaper to transfer funds, wire money to a local bank, or other financial services that may be needed while traveling. It also means B2B transfers can happen more easily, providing better facilitation for business deals when they occur.

7. Deposits to online banking platforms are generally insured.
Most financial institutions treat their online banking platforms as they do any other account. If insurance is available, then these accounts are protected to the maximum amount allowed by law. Not every online banking platform is insured, however, so it is up to the account holder to perform their due diligence before opening an account with a financial institution to make sure their money is protected.

8. It is a faster form of banking.
The entire process of online banking is typically much faster than it is when conducted in person. Applying for a loan can happen in just a few minutes thanks to the ease of filling out online forms. With saved browser information, it can even happen in seconds. Investments can be checked on in real time and trades made instantly just by clicking the “buy” or “sell” button. Important information about accounts is widely available in easy to consume formats so time isn’t wasted reading brochures and endless paperwork.

9. Many online banks that have no brick-and-mortar locations tend to offer better rates.
The same is also true for credit unions and some traditional banks as well. Better interest rates on loan products, higher interest rates on CDs and money market accounts, and other investment benefits are more likely to be available. This is because online banking requires fewer financial resources to be available in order for them to be successfully run. Sometimes accounts can even be opened without a minimum balance and there may be an option to have no service fees as well.

10. Financial planning resources are more readily available.
Do you know how much you’ll need to save every month in order to retire with the money you want? You can thanks to the financial planning resources that many online banking platforms happen to have. From retirement calculators to mortgage tools to tax resources, there are numerous services that are available to help consumers better budget their finances so they understand their overall liquidity better and can plan more accurately for the future.

11. It’s easy to manage multiple accounts.
From one device, consumers can manage multiple online banking accounts at the same time. This makes it possible to spread out assets so that one loss doesn’t have to be a complete financial loss that devastates personal finances. With modern browsers, all of these accounts can even be open at the same time with multiple tabs.

What Are the Cons of Online Banking?

The primary disadvantage of online banking is its security. Accessing financial institutions through a data connection will never be 100% secure. This is especially true on smartphones or cellular tablet connections. An interception of the data signal can transmit password information to someone watching and that’s a fast way to suffer from the ill effects of identity theft. There are multiple levels of security to counter this issue, but as data exposure stories from Home Depot and Target prove anything is possible. Here are the other disadvantages.

1. There is no guarantee of uptime.
A small technical glitch can be enough to take an online banking platform offline for quite some time. Other actions, such as maintenance or hacker attacks, may also limit or eliminate access to account information for prolonged periods. If you need instant access to your money or need to know your balances for an emergency payment, there is no guarantee that you’ll have it. Many online platforms offer 99.999% uptime, but that means there will always be outages at some point.

2. Site navigation can be quite difficult.
The user experience of some online banking sites can be quite confusing. Sometimes account access happens from sidebar menus. Some sites don’t have mobile versions and have Flash applications that can’t be read by certain mobile devices. There may be several steps required to access specific components of an account that are not always well documented. Although many users can get around this disadvantage with some learning of the navigation, some users may be put off by the difficulty.

3. Online banking provides a certain level of user apprehension.
Even if consumers are confident about the benefits of online banking, that confidence doesn’t always wipe away apprehension. Having so much access to so much personal information with just a couple clicks of the mouse can be overly bothersome to some people. For business owners, vital financials are exposed online through this process and for those who are used to banking in person, this anxiety can be difficult to ignore or overcome.

4. It’s not always accessible.
Although internet access is about 90% saturated in the United States, that’s still 10% of the country that doesn’t have online access. No online access means no access to online banking features. For the rest of the world with lower saturation rates for the internet, the problem is even greater. This disadvantage especially hits those who live or work in rural regions where even cellular access is limited. Accessibility can also make it difficult to complete a transaction or application should the site go down. A loan application that is 75% complete and not saved will need to be restarted once the site comes back up.

5. Errors or fraud that occur can take years to resolve.
Identity theft isn’t the only issue that online banking platforms face. A banking error that seems legitimate can take months to correct because the technical details of the error make it seem real. Fraud can occur very easily just by making a transaction seem like it was user initiated. There’s no real way for consumers to check on the stability of a financial institution or its employees, which means problems in this area can make for a prolonged headache.

6. There may be zero customer service.
Consumers may be able to access their bank accounts whenever they wish, but that doesn’t mean there is always someone to help them when they access their accounts. Even during regular business hours, customer service issues for online banking problems tend to be placed on the back burner, resolved when there are a few spare moments during the day. Some account holders prefer dealing with issues in the traditional face-to-face manner at the financial institution. That’s not to say every financial institution operates this way, but there is this risk.

7. Transactions aren’t always immediate.
Although transferring money may happen immediately through your online banking platform, there may be a delay in the actual implementation of that transfer. Some banking platforms even require up to 10 business days for a full transfer of certain funds to happen. Whenever there are transactional delays, there is always the possibility of an error occurring. Without screenshots, printed receipts, or confirmation numbers, there is always the possibility of a needed transaction getting lost.

8. The relationship between the financial institution and the account holder is lost.
Bank managers [or their counterparts in other financial institutions] often have a lot of discretion as to being able to change the terms and conditions of a banking product. Sometimes they even have the discretion to award loans or credit lines to individuals or businesses that are slightly below credit thresholds. In the world of online banking, the regulations are stiff and steadfast. Reversing fees, waiving service charges, or taking a look at your overall idea when your credit score is 3 points below qualification doesn’t happen with an online platform.

9. There’s no real way to deposit money you have in-hand.
If you have cash or checks that need to get into your account and they’re sitting on the desk in front of you, then you’ve got to go somewhere to deposit them. Some consumers are able to deposit money in an ATM or use a mobile app to take a picture of the check, but not every financial institution allows this service. Digital accounts like PayPal offer 3-5 business day transfers of a digital balance into a “real” balance, but not cash or physical checks.

10. It’s easier to spend money that isn’t tangible.
One of the biggest disadvantages to online banking is the fact that it makes the money seem like it isn’t real. Those are just changing numbers on a computer screen and not cash in-hand. That makes it seem like there is less value to the money that is held in a person’s account and that ultimately means that spending that cash is easier to do. Saving money is much more difficult unless strict budgeting happens are maintained consistently.

11. Phishing.
We all like to think that we can spot a scam from a mile away, but phishing happens successfully every day. One simple email that looks like it came from your financial institution can be all it takes to create a financial headache. Sometimes phishing even occurs on social networking sites today. As a best practice, never give out your password or account details unless you enter them directly into the verified online banking platform.

How Do You Feel About Online Banking?

These online banking pros and cons show that instant access to personal accounts is generally a positive experience. There are certainly some disadvantageous situations which can develop over time and under specific circumstances, but the ability to access account information from virtually anywhere in the world at any time is a difficult advantage for personal finance to ignore.

Most financial institutions already offer this service. If you’re interesting in turning your accounts into an online banking experience, then speak with your preferred financial institution about the steps required to make this happen today.

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