Increased Digital Banking Should Push More Consumers to Online Banks
- A checking account from a brick-and-mortar bank may come with a monthly fee ranging from $7 to $15 or higher.
- The typical basic savings account from a big bank pays an extremely low rate—sometimes as low as 0.01% APY.
- An online checking account from a typical online bank will have no monthly fee.
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The COVID-19 pandemic drove consumers to embrace digital tools for managing their money as branch access was restricted and customer service wait times became unbearable.
When forced to adopt digital banking, consumers experience the ease and convenience of interacting with their money through a computer, mobile device, or ATM.
With months of money management through these platforms, the shift in banking habits means they should look to online banks to reap the benefits that come in the form of lower fees and better interest rates.
Online Banks vs. Banks With Branches
To understand why online banks are able to provide more attractive accounts than the competition, you don’t have to know any complex financial jargon.
Simply, online banks don’t have to deal with the hefty costs of running expensive physical locations. They don’t pay for, among many other operating expenses:
- buying or leasing branch location
- staff salaries
- utilities
- insurance
With millions of dollars saved every year, online banks can offer products and services with lower (or fewer) fees and higher interest rates on deposits.
Checking accounts
For comparison’s sake, a basic checking account from a brick-and-mortar bank may come with a monthly fee ranging from $7 to $15 (criteria may be met to waive this fee).
A checking account will have no monthly fee from a typical online bank.
Savings accounts, money market accounts, and CDs
When it comes to deposit accounts that pay interest, online banks also stand out due to their higher rates – whether that is a savings account, money market account, or certificate of deposit (CD).
The typical basic savings account from a big bank will pay an extremely low rate—usually 0.01% APY. That’s interest earnings of $1 per $10,000, which is quite insignificant. With such low rates, a savings account is just a place to keep your money, not to grow your money.
Online banks are able to offer much higher rates – some of the best available nationwide.
Again, for example, CIT Bank’s Money Market Account offers an interest rate that is many times higher than the rate on a traditional savings account. Furthermore, the account has no minimum balance requirement or monthly fees.
Essentially, your money will grow much faster with an online bank.
FDIC-Insured Too
For many consumers, having their money entirely with an online bank is uncomfortable. There’s a sense of security when you can see the physical building that supposedly houses your cash.
The reality is that bank branches don’t hold that much cash, and the physical location is the biggest difference.
Online banks are FDIC-insured financial institutions, just like the banks with brick-and-mortar locations. Deposits are insured up to $250,000 per account ownership type per depositor per bank.
Accessing Your Money
Online banks know that digital banking tools are the primary ways that customers manage their money, so it’s not surprising that they emphasize online and mobile banking platforms.
Standard online banking features allow customers to view account details, transfer funds, and pay bills.
Some online banks also offer additional features on mobile devices. For example, CIT Bank allows free remote check deposits and the ability to locate nearby ATMs with their mobile banking apps.
Such digital banking tools get the job done for typical, everyday banking transactions.
Are You Ready for the Switch?
Review your existing banking habits to determine whether an online bank is right for you.
In the past year (even before the pandemic), ask yourself:
- How many times have you needed to go to a branch to speak to a banker or teller?
- Have you used any financial services available at a branch that cannot be found elsewhere?
More likely than not, you’re already digitally conducting your banking and ready for the change.
Understandably, switching banks can be quite a hassle if you have an account established as the financial hub of your personal finances.
Fortunately, with online checking and savings accounts from online banks such as CIT Bank, you can open them and use them alongside your existing bank accounts without worrying about monthly fees or minimum balance requirements.
Over time, you might realize that you can make the transition entirely to take full advantage of the consumer-friendly fee policies and better interest rates.
*Money Market Annual Percentage Yield (APY) is accurate as of October 23, 2020. Interest Rates for the Money Market Account are variable and may change at any time without prior notice. Fees will reduce earnings.
