In 2003, I first heard about digital banks like Up and Chime and how they were offering so much better interest than all the brick-and-mortar banks. At the time, I felt extremely uncertain about investing my hard-earned money in a bank that I couldn't see and touch if I wanted to get my money out.
Fast forward 18 years and online banks have advanced a lot! In a market with extremely low lending rates, it is leaving people with very low-interest rates on savings and checking accounts. A lot of the traditional banks, as you see in “It's a Wonderful Life“, are being squeezed out, because the buildings are creating a lot of overhead. This is translating into lower interest rates for you and me.
That is why, now more than ever, investors need to consider where they want to put their money. Is it only about having a building that you can touch and see where your money is at? Or are you focused on how you can get the highest interest rate for your hard-earned money?
With how competitive the market is today, I put together what I think are the top 5 reasons to open an online account:
- Higher Interest Rates – since online banks don't have to pay the fees for renting out office space and paying tellers to work the bank, then this all translates into their ability to offer you higher interest on your savings. Over the last 10 years, as the Fed has dropped Prime interest rates to near zero, it makes reducing expenses even that much more important both to you and the bank's ability to offer competitive rates.
- Digital Check Deposits – do you have a hard time getting to your normal bank to deposit your check? Is it a big inconvenience and hassle? Well, the nice thing about online banking is that they offer digital check deposits with your phone. Yep…take a picture of the next check you receive and watch it get automatically deposited into your account.
- Automatic Bill Pay – as I've written about before, I love automating my finances as much as possible. One cool feature of online banks is their ability to offer free bill paying. In order to help reduce the amount of time that it takes to manage your finances, this feature is pretty amazing and will help ensure you aren't late on bills and can automatically be paid from your online account.
- Same FDIC insurance – you may think that only banks that you can see and touch are FDIC insured. Nope! Your online banks offer the same FDIC security that your traditional banks offer. As long as you are under the $250,000 level, then your online banks offer the same insurances as any traditional bank would.
- Automation of Your Finances – if you are serious about mapping out your financial picture and getting your money to immediately work for you, then using an online bank is a great step in that direction. With how easy it is to interconnect your accounts – through one centralized online account – then it makes it that much easier to start making money. Since opening my own online account and previously writing about mapping out your moneyflow, it has helped in accelerating my quest for financial freedom.
So what is stopping you from opening up your online account? If you've already opened one, what benefits have you seen from it?