By Carla Fried | American Express Credit Intel Freelance Contributor
4 Min Read | August 13, 2020 in Money
A surge in customers signing up for online banking during the first half of 2020 accelerated Americans’ long-term shift toward digital finances – especially via mobile apps.
Digital banking can save you plenty of time – you’ll make fewer trips to the local branch – and help you stick to a budget.
Cyber-fraud is a disadvantage but there are steps you can take to protect yourself, like a tricky password and two-step authentication.
It’s not just TV binge watching and video conferencing that have lately skyrocketed in popularity. Online banking has, too. April 2020 alone saw a 200% increase in people signing up for mobile online banking,1 and those newbies are joining legions of people who already bank virtually: An estimated 30% of Americans already handle all their banking online.2
If you’re interested in digital banking but aren’t comfortable moving everything online, that’s OK. The vast majority of brick-and-mortar banks – industry lingo for bank branches you can walk into – also offer digital banking for free to existing customers.
As with most things, there are advantages and disadvantages to online banking. Learn the ropes and you can build a banking strategy that gives you the best of online and off.
No “banker’s hours”: One of the best features of digital banking is that it’s at your fingertips 24/7, which sure beats bank branch hours. You can check balances, pay bills, and even deposit checks when you log in to your online bank account. Many online banks offer 24/7 customer service, too.
It might be free: Some banks charge a monthly fee for checking accounts with lower balances. You might find that if you agree to do your banking online, you can snag a no-fee account.
Automated bill payment: Paying your bills on time is one of the surest ways to build an excellent credit score – just read “Credit Score Ranges: What is an Excellent, Good, or Poor Credit Score?” Online banking often has options to set up automatic bill payments to help you make sure you always pay recurring bills on time. For those of you familiar with late fees, add up how much you might save each year if automation can help eliminate them for you.
Deposit checks from your couch: Or wherever you go. About one-third of people who visit a brick-and-mortar bank make the trip to deposit a check.3 You might be able to eliminate that time sink, as most banks now have an app that allows you to make a digital deposit: log into the app, upload a photo of the front and back of a paper check, hit submit, and you’re done.
Keep a closer eye on where your money goes: If you are following a monthly budget, it can be easier to keep tabs on debits and credits right on your phone or computer. You can also set up all sorts of helpful text or email alerts that can make it faster and easier to stay in control. Popular reminders include getting pinged when an auto bill payment is going to be sent, when a direct deposit lands in your account, and a friendly warning if your balance is getting a tad low.
Earn higher interest on savings: Most banks barely pay any interest on savings accounts these days. The average is 0.06%. But here’s where getting online can make you some money. There are some banks that operate exclusively online. Without the overhead of maintaining branches, they can afford to offer customers higher interest rates on savings accounts. Many online-only banks offer high yield savings accounts that pay close to 1% interest.
Missing the human touch: If you value having face-to-face chats with a human who can respond instantly and knowledgeably to most questions that come to mind, that’s a reason to keep the option of walking into a brick-and-mortar branch when you need some advice.
Possible limits on digital check deposits: If you frequently have paper checks you need to deposit, you may not be able to use the digital deposit app feature for everything. Check with your bank on per-check and monthly limits for digital banking deposits. If that’s going to be a problem, you can try asking if they can raise the limits for your account.
Staying on alert for cyber fraud: The rising popularity of virtual banking this year prompted the Federal Bureau of Investigation to issue a public service announcement on how to bank safer online.4 Some simple steps greatly reduce the odds you will have an issue. For example, to avoid downloading a fraudulent app, log into your bank account and use the bank’s link to its app – because you know it’s legit. And don’t scrimp on smart security steps. Use a complex password (they get easier to remember the more you use them), agree to two-step authentication, and don’t log in using public Wi-Fi. A trick for remembering that password: Log in and out a half dozen times right after you set it, so you can get it into your fingers’ “muscle memory.”
Online banking isn’t just convenient, it can be a great tool to help you take control of your personal finances. Having real-time spending and deposit information at your fingertips makes budgeting all the easier to stick with, and automatic bill pay is a great way to help build an excellent credit score.
2 “US Direct Banking Satisfaction Study,” JD Power
3 “2020 Retail Banking White Paper,” Qudini