150: The Pros and Cons of Online Bank Accounts

Hey, I'm Chris.

I'm a former Analyst, Podcaster, and Producer. My goal is to help you understand your finances better in about the time it takes to make a bag of popcorn!

The banking industry, as with most industries, is shifting to meet the demand of internet-savvy Millennials and Gen X-ers. With that evolution, online banking has exploded. 

If you’re interested in opening an online bank account, here are the pros AND cons to consider before calling up customer service or clicking ‘apply’. 


No Additional Fees

With traditional bank accounts, you have to worry about things like monthly service fees, overdraft fees, ATM fees – the list of fees can go on forever.

Having no additional fees is the convenient part of online accounts. 

You don’t have to worry about being blindsided by so many fees.

Higher Interest Rates

Higher interest rates with online accounts go for savings AND checking accounts!

Since online banks are… well… online, they don’t have the overhead expenses that traditional brick-and-mortar institutions are responsible for. They don’t have rent to pay or as many employees to pay.

Due to the low operating cost, these online banks have the ability to pass those savings on to you, the consumer, through higher interest rates.

No Minimum Balance

You are starting to see this requirement go away even in the traditional brick-and-mortar banks, but it does still occur with some organizations. 

There are some banks that require you to maintain an average minimum balance and if you don’t, they hit you with the fee.

Many online accounts allow you to open with just a dollar and no minimum balance.

New And Exciting Features

Online accounts are introducing into the market new features, such as receiving stock as a bonus for using the account – or even traditional cash back.

I’ve even seen some of these accounts advertise that you’ll get your direct deposit two days earlier than when it normally would show up! 

If a fancy debit card is your thing, these accounts have you covered. They have all kinds of metal or even engraved debit cards that you can throw in your wallet!


It’s not all rainbows and butterflies, folks. There definitely are some downsides to these online accounts. 

It Can Be Difficult To Get Cash Into The Account

If you’re someone who gets a lot of cash from friends or family that you end up having to put into your bank account, there’s not really an easy way to get that money into the account.

This means that you’re probably going to have to maintain an account at one of the brick-and-mortar banks in order to have a convenient way to get the physical money into the online account.

In some cases, there are partner ATMs that you can go to that will allow you to deposit money into your bank account, even though that’s not a branded ATM for your bank. There are sometimes fees associated with making this deposit. 

One of the other options I’ve seen is that you have to actually go to another bank or to a grocery store and buy a money order or cashier’s check and then use the online check deposit feature to get that money into your account. 

The downside is that there can be fees associated with buying these money orders or cashier’s checks. 

if you’re someone who deals with a lot of cash, you may want to really research your options before opening one of these accounts. 

Getting Cash Out Can Be A Nuisance

When you do go to an ATM to get some cash, many of these companies are offering to reimburse you for your ATM fees, but read the fine print because it may not cover you in all situations.

One little side note to this is that even traditional brick-and-mortar banks have these fees as well. 

If you try to go to a Chase ATM with your Wells Fargo debit card, chances are you’re going to be hit with several fees to make that transaction work as well. So I’ll put an asterisk next to this con. 

Is It really Free?

These accounts do state that they are free in most situations, but it may be tied to another type of investment account that you have to hold. 

In some of these situations, I’ve seen that they offer a free checking account. However, you do have to maintain an investment account with them as well, and those investment accounts come with monthly fees. 

They’re not huge fees, but it is still a fee.

I’d love to hear your thoughts and what you think about these types of accounts. 

  • Are you for them? 
  • Are you against them? 

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