How Does Online Banking Work?
Online banking guarantees a safer, quicker, and easier system to the banking experience. It allows you to manage your bank account from the comfort of your home over the internet.
You only need to have a computer or smartphone to achieve all your banking tasks when convenient. In addition, you are not restricted to the normal banking hours to do your transactions.
You may not have been able to harness the full potential of online banking, but we have provided everything you need to know about online banking and how it works. However, before you proceed, it is important that you take a look at some critical factors when choosing a bank if you are considering opening a new bank account anytime soon.
Online Banking: Definition and Examples
Online banking is the process of banking engaging in a banking activity on the internet which might be offered by online-only or brick-and-mortar banks with online services. With the provided internet services, you can transfer funds from your bank account to another, pay bills, apply for a loan, check account balances, deposit checks, and also verify transactions.
Wells Fargo and Bank of America are examples of online banks.
How Do Online Banks Work?
The major essence of online banking is to provide an easy, less stressful, and speedy banking procedure whether during or off banking hours, while you are fully in charge to make all your satisfactions happen.
You’ll be able to do everything you can typically do at a traditional bank or credit union location also online, beginning with opening a bank account.
One seemingly single benefit of using a traditional bank over the online counterpart is the ability to use an ATM. However, there is a rising number of online banks and credit unions that are now offering access to a network of ATMs that will not charge you on your transactions, while some others will reimburse your ATM fees up to a particular amount every month.
Opening Accounts In An Online Bank
Do you want to open an account in an online bank? It is pretty easy, without the need for paperwork. You can open savings, checking, and other kinds of accounts with your electronic signature. The process doesn’t require any long activity – in like 10 minutes, you are done.
As a customer of a traditional bank that provides internet services, you can register to receive online services through the company’s web platform. Basically, you’ll require a device with a web browser – could be a tablet, computer, or smartphone – an internet connection, your bank account number, and personal information to verify your identity such as your official name, birth date, and Social Security number.
You will need all the information excluding the bank account number, to open an account with an online-only bank or credit union with which you have not previously had a customer relationship. You may need another personal mode of identity such as a driver’s license.
You’ll need your email address to create login information. After completing your registration, you can log in to your account to start banking online with your device, having a strong internet connection.
To use a check, your bank can print a check that would also be mailed to you. This may come periodically–probably every month. For increased convenience, you can also send money to a payee electronically, even when the owed figure changes every month.
If you need to do a transfer of funds for any reason, they can be easily done online quickly and easily. You can send money for the purchase of an item, or to friends and family almost instantly through provided transfer features on your banking app. You can also link your bank accounts at different banks.
Applying for Loans
In the past, for you to get a loan from a financial institution, you’ll have to go through a rigorous paperwork procedure which may even turn out unfavorable. But this doesn’t have to be so.
Applying for loans online only requires a short process of filling in your application, credit check, and a response on your qualification.
Most online financial service providers with online loan applications provide the funds the same day you are approved to get a loan. Other lenders that are completely focused on online operations can make almost instant lending decisions.
When you are paid with a check, you can make the deposit easily from the comfort of your home through your smartphone. Using a mobile check deposit, you’ll simply have to take a photo of the check using your bank’s mobile app that will be submitted for payment. It is not even necessary to mail the check.
Checking Current and Past Transactions
If you need to check your current and past transactions you’ll find it easy with most banks and credit unions. You’ll also be able to review past monthly statements and also verify your recent transactions were successful.
You may be able to view your transactions by type and frame such as bank card payment.
Another huge advantage of online banking over traditional alternatives is the ability to be able to create alerts. For instance, if there is any potentially fraudulent activity on your account, you’ll get an email or text message notifying you of the event. The notification may also come when your balance goes below a certain amount, when a check gets cleared, or when deposited money is now available.
Receiving these alerts helps to keep you informed of the goings-on in your account, and more importantly helps to stop a fraudulent act.
Traditional Banking vs. Online Banking
Online banking offers immense advantages over traditional alternatives. But traditional banks too have their top-level benefits.
Better Interest Rates
In some cases, traditional banking provides borrowers with better interest rates than online banks. Online banks owned by physical ones can especially provide competitive rates.
It is very likely you want higher interest rates on your savings to make your money produce increased profits for you – online banking would offer you. But on the flip side, lower interest rates are offered for loans depending on the total loan cost. You should consider shopping around for better options, but online rates will almost always serve you better.
Online-only banks typically charge lower fees than traditional brick-and-mortar institutions for the same reasons they pay more in interest. They are less likely to charge fees at all for certain services or for failing to maintain a minimum average balance.
Even though you can make deposits of large sums to your online bank accounts, you will have some problems when you have to frequently make large withdrawals or deposits and you have to do it through a bank teller.
Some banks have daily limits on your mobile deposits and may require that you visit a branch or an ATM to make deposits that exceed the limit. In essence, you may have a hard time if your bank doesn’t have enough network of ATM centers.
Most banks have limits on the amount you can withdraw each day. If you need to make more withdrawals but cannot get your bank to increase the daily limit for you, then, you may need to request a cash advance in person which may be hard if there is no provision for physical branches.
Traditional banks can also provide other services such as safety deposit boxes, notary services, and cashier’s checks, which you will not get with online-only banks.
You should consider having accounts at a traditional bank and an online-only bank to leverage higher-interest savings account rates and low fees at the latter while also maintaining the option to harness in-person services at the former.
Not everyone is comfortable with making use of technology to bank online. If you fall in this category, banking online may come with a steep learning curve.
Also, there could be glitches. For instance, the bank’s system may be down, and if that happens, you may be pushed out of a pressing transaction. For complex situations, you might benefit from a physical meeting at a brick-and-mortar bank.
If we weigh the safety advantages of both online and traditional banks, online banking comes top for so many reasons. For instance, having to deposit your pay directly to your bank erases the possibility of any theft on your check from the mail.
In addition, no one can copy your account from your sent checks as they are often secured at both ends when sent, and are not stored. And if there is any error or fraud on your account during funds transfer, you’ll be protected by Federal law so long as you are swift in acting.
One cause for concern with online banking is phishing schemes. These online scams try to lure you to divulge important information to steal from you. But, if you can be careful to provide information to only trusted websites and persons, you are not going to get caught in their web. Watch what you click on and reach out to your bank’s customer service if you have concerns.