The best online banks, sometimes called “direct banks” or “virtual banks,” perform many of the same functions as old-style brick and mortar banks do, but without the overhead associated with physical locations and large staffs.
Older folks may find it hard to believe, but a growing number of Millennials have never stepped into a financial institution. If they had, they would likely have encountered a nice-looking but basically empty space, with a few tellers, managers and a smattering of customers. There would no doubt be an automatic teller machine out front, and plenty of colorful signs and posters inside touting the latest and greatest accounts and features.
It’s easy to know how to open an account at a traditional depository – simply walk in and ask somebody for assistance. Using one of the best online banks can be even easier, because you don’t have to travel anywhere to open an account or perform a banking task. In fact, with an online-only bank, there is nowhere to go!
We review how to open an online bank account below. Once you’ve opened an account, you can access it any time by logging in — that is, providing your user ID and password/PIN. You’ll probably be directed to a home page that summarizes your account status and recent transactions. If it’s your first login, take the time to familiarize yourself with all the features of your account and the website/application. If you have any questions, take advantage of facilities such as online chat, FAQ screens and a customer help desk.
The two most basic tasks associated with a bank account are deposits and withdrawals.
There are several ways to deposit money in an online bank account:
- ATMs: Because your online bank has no branches, it would arrange for you to use one or more ATM networks for free. Some of the best online banks partially reimburse you for out-of-network ATM usage fees.
- Transfers: You will be able to deposit money via online transfers from other accounts or from mobile wallets. Smartphones and tablets equipped with card readers, such as Square, GoPayment, and PayPal Chip Card Reader, will allow you to deposit money by swiping a debit or credit card.
- Checks: Many of the best online banks accept deposits via photo-checks (also called e-checks and mobile checks): You use your mobile device to photograph a check and deposit it by transmitting the image. If you are in no rush, you can even mail the check using the bank’s postage-paid envelopes.
- Direct Deposits: You can direct deposit your paycheck, Social Security check or other regular sources of money, just as you would at a traditional banking company.
As with deposits, you can use ATMs and transfers to withdraw money from your account or to make a payment. In addition, you have these tools:
- Debit Card: When you make a purchase with your debit card, the money is withdrawn automatically from your checking account. You can also ask a merchant for cash back when making a purchase. Your debit card might be plastic, or it can be an electronic debit card within your digital wallet, such as Apple Pay, Android Pay, Samsung Pay and MasterPass.
- Write a Check: You can write a paper check against your account and cash it at a check-cashing facility, supermarket, or other convenient location. Of course, you can write checks for purchases at any location that accepts them. Not all online banks provide paper-based checking.
Naturally, you can perform many other tasks when banking online, including checking your balance, reconciling your account, stopping payments and arranging automatic payments.