Online Checking Accounts Explained

Reviewed: February 22, 2014
By FinanceWeb

Many banks offer electronic access to account details, but have you considered doing all of your banking exclusively online? Online checking accounts deliver the benefits of regional banking with only a few drawbacks.

First, an online checking account from an FDIC-insured bank still guarantees that your money will be safe. You have the government’s promise that you will get your balance back even if the bank goes out of business. Federal and state regulators also ensure that your transactions remain secure and your privacy is guarded across the Internet.

Second, a checking account from an online bank operates just like a checking account from a local bank. You can view transactions, look at past statements, set up notifications, transfer cash and receive paycheck deposits.

Third, you may qualify for better interest rates and lower fees with an online checking account. Because direct banks do not operate branch offices, they do not have the same overhead expenses as brick-and-mortar institutions. They often pass the savings onto consumers in the form of higher yields, smaller balance requirements and truly free checking.

The lack of branches saves money, but it also creates two inconveniences. When you want to withdraw money, you cannot stop by a local branch and speak with a teller. Instead, you typically must find an ATM in the bank’s network, such as AllPoint or MoneyPass. Fortunately, these cash machines exist in thousands of locations throughout the United States. Some online checking accounts let you withdraw money at any ATM, and then the bank refunds the fees charged.

In addition, when you want to deposit a check, you cannot just take it to an ATM down the street. You must mail it to the main bank or record it through mobile depositing. You essentially photograph the front and back of the check and then transmit the images to the bank. Taking these photos with a low-resolution camera can be frustrating and time-consuming, but more advanced smartphones can handle the images with few problems. If you do not own an iPhone or Android phone, you may be able to record the check with a desktop scanner.

Overall, online checking accounts bring significant advantages to people who are willing to give them a try. As technology advances, the minor irritants will likely disappear.