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An online bank is an institution that operates mostly or solely online.
Your money is safe at an online bank as long as the company is federally insured by the FDIC.
Online banks don’t have as many overhead expenses as traditional banks, so they can afford to pay higher rates and charge lower fees.
Depositing cash at online banks can be tricky, but most institutions do let you deposit paper checks digitally.
See Business Insider’s picks for the best online banks »
Table of Contents: Masthead StickyWhat is online banking?
Online banks are institutions that work mostly or exclusively online.
Many brick-and-mortar banks (meaning banks with physical branches you can visit) allow you to access your accounts through their websites or mobile apps — but with an online bank, everything happens online. Some online banks do have a few physical locations, but they still operate digitally for the most part.
Are online banks safe?
In short, yes, online banks are safe.
The most important part of shopping for a bank is choosing one that is insured by the FDIC, or Federal Deposit Insurance Corporation. (If you’re using a credit union, it should be insured by the NCUA, or National Credit Union Administration.) A bank should publicize that it’s FDIC insured on its website, or you can search for an institution on the FDIC site.
FDIC insurance works similarly to other types of insurance. If you have renters insurance and your home is damaged in a natural disaster, your insurance will cover the costs of damages up to a certain dollar amount. If your bank has FDIC insurance and shuts down, the FDIC will give you the money you stored in the account, up to $250,000 for an individual account and $500,000 for a joint account.
Maybe you’re considering using an online banking platform, such as Wealthfront or Chime. These companies aren’t technically banks, but they’re backed by banks that provide FDIC insurance, so your money is still safe.
As far as security goes, online banks are just as safe as brick-and-mortar banks. But you should practice the same safety measures you would use with any other sensitive information you access online. Here are some tips:
Don’t log into your bank account on a public Wi-Fi network
Change your password on a regular basis
Consider using a VPN when you check your bank information online
The pros and cons of online banking
The pros of opening an online bank account
Higher interest rates. Online banks save money by not having brick-and-mortar locations. As a result, they can afford to pay higher interest rates than traditional banks on your savings, CDs, and money market accounts.
Lower fees. Brick-and-mortar banks can offset some of their costs by charging you service fees. Most online banks don’t charge monthly fees, though, and other fees tend to be lower, too. For example, …read more
Source:: Business Insider