Online banks are different than the online banking you do with your traditional brick-and-mortar bank. You conduct all of your banking business through an app or website but online banks are quite different with both pros and cons.
You don’t get as much customer service. You don’t get all the products such as home loans, and car refinancing that a traditional bank may offer, explains certified financial education advisor Patrick Di Cesare. “In return, you get much lower fees and savings accounts that may offer much higher interest rates than you would get with a traditional bank.”
Crazy high interest rates on savings and checking accounts
Traditional savings accounts at brick-and-mortar banks are generally under .5% while online banks offer interest rates of 3-4%.
If that seems too good to be true, Di Cesare assures people looking to put their money somewhere safe, online banks are just as safe as the bank down the street provided it is insured.
FDIC banks are insured up to $250k
“Any bank, whether it be a traditional or online bank, make sure you look for that FDIC insurance That means the federal government insures deposits with those banks up to $250,000.”
Di Cesare says the exception is for anyone putting over $250,000 in an account at any online or traditional bank. It’s best to keep only $250,000 in any one bank.
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Online banks have been around for decades but after the recent collapse of Silicon Valley Bank, many people with their life savings in an online bank may wonder if their money is safe there.
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