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Online banking—through a bank, credit union or online-only bank—makes it possible to conduct banking transactions over the internet, generally through a website or dedicated app. It is also sometimes called mobile banking, since it can be done through your smartphone or tablet. If you've been wondering if online banking is right for you, read on to learn more.
What Is Online Banking?
In the most basic terms, online banking is the act of conducting financial transactions via the internet. Instead of visiting a local bank branch to perform banking tasks such as making a deposit, transferring money or paying your bills, you handle everything with your financial institution through a secure website or app.
With online banking, you can manage your accounts online at any time—day or night—even outside of banking hours and on bank holidays. Depending on the nature of your transaction and the hours your bank operates, however, you may need to wait for certain transactions, such as check deposits, to be finalized.
What Can You Do With Online Banking?
Online banking services vary by bank. But generally, you can use online banking to conduct almost any activity that you would otherwise be able to do at a physical bank branch. Several of the most common transactions that you can perform over the internet through a bank's secure website include:
Online bill pay makes it easy to pay all (or most) of your bills in one place rather than chasing down separate invoices or statements each month. After registering and creating an account, you should be able to add payees and schedule payments, make one-time or recurring bill payments and set reminders for upcoming due dates. When scheduling transactions, remember that it may take a few days for your bank to complete the transaction.
Make a Deposit
If you've ever carried a check around in your wallet for weeks because you didn't have the time to visit your bank in person, it's nice to know that most banks and credit unions offer a feature that allows you to make a deposit online.
Typically, you'll do the following to deposit a check with online banking:
- Open your banking app on your phone
- Endorse the check by signing the endorsement line on the back
- Take a photo of the front and back of the check with your phone
- Choose which account in which to deposit the check and tap submit
Keep in mind that many banks require check verification and your funds may not be available for immediate withdrawal.
Manage Your Accounts
Accessing your bank accounts and bank services online provides the most up-to-date account information, so you know exactly how much money is in your account. You can view a running account of all activity, see what money is coming into your account via check or direct deposit, and confirm outgoing payments and ATM deposits and withdrawals. You can also make sure you recognize each transaction so you can quickly address transactions that may be due to fraud or an error.
Make Account-to-Account Transfers
If you have multiple accounts, such as a line of credit, a checking account and savings accounts, you can check your balances and easily transfer money from one account to another to cover any shortfalls. This is especially helpful if you keep a minimum balance in a checking account that earns low or no interest and only transfer money from a high-yield savings account when necessary to pay bills or cover a large purchase.
Check Statements and Account Balances
Online banking gives you the option to receive electronic versions of your billing statements. Plus, you can check how much money is in your accounts at any time. You can also spot which bills have cleared or if a deposit has fully posted.
However, it's important to note the difference between your current and available balances. You may have paid three bills for a total of $350, and deposited $100 that has not yet been processed by your bank. Your available balance and current balance may show a difference of $250. To make sure you're not overspending, always defer to your available balance, which gives you a more accurate idea of where your balance currently stands.
Many large banks and credit unions let you order checks and deposit slips online through their website. Generally, you can also check costs and see a complete catalog of check designs to choose from. If there's a charge, it may be deducted from your checking account when your order is processed.
Other services your financial institution may offer online can include:
- Ordering a stop payment
- Setting up fraud and low balance alerts
- Offering bank-to-bank transfers
- Sending money
- Locating an in-network ATM
- Updating your contact information
- Ordering a debit card
Some banking institutions may even offer extra services, such as free access to your credit score.
Pros of Online Banking
Several key benefits make online banking a popular option for many people.
- Convenience: If you can't get to your bank but want to deposit a check you've been holding for a week, online banking offers the convenience of making a deposit online 24/7.
- Flexibility: Without ever stepping into your bank, you can view your accounts and bank statements from wherever you have a secure internet connection.
- Banking services: Nearly all of the services offered at brick-and-mortar banks can also be accessed online. However, it's worth noting that some smaller community banks and credit unions may not have the technology to offer all of the banking products you need or want.
Cons of Online Banking
Along with the benefits of online banking, there are a few drawbacks, including the fact you need a secure internet connection to get started. Other drawbacks may include:
- Security: Online banking is safe through most banks and credit union's websites as long as they have standard security measures in place and your money is insured by the Federal Deposit Insurance Corp. (FDIC) or National Credit Union Association (NCUA). You can help ensure the time spent banking online is secure by avoiding public Wi-Fi networks, keeping your log-in and personal information safely tucked away and not clicking on links that look like (but aren't) sent by your bank via email or text.
- Cash deposits: It's impossible to deposit cash into your account online. Whereas that may be an option in the future, for now you'll have to visit your local branch to make the deposit.
- Impersonal: If you prefer to talk face-to-face with a banking associate, you may find online banking rather impersonal. Although many banks have access to chat, it's not the same as getting personal financial help one-on-one from a real person.
- Limited options: Some large banks offer many of the same services you access every day by visiting your local branch office. However, if you want to buy a money order, access a safety deposit box or get a document notarized, you likely won't be able to do that online.
The Bottom Line
More than 60% of consumers currently use online banking services at least once a week, according to a survey by PwC. As banks and credit unions add additional services and tighten security measures even further, it's possible that figure will double in the coming years.