Online banking and online banks make your money safer with few fall backs. With the elimination of paper, your statements are more secure. In addition, getting rid of paper reduces overhead costs, which is why online banks pay higher yields on checking and savings accounts.

Online banks are more secure than brick and mortar banks because they all work over the internet with state of the art security features. They are more secure than brick and mortar banks, according to a study by MSN.com. If you use online banking with your brick and mortar bank, lets say Chase or Bank of America, then an online bank will be an easy transition. Better yet, online banks are safer. Why? Because their livelihood depends on it. Online banks are small. Just one security breach is enough to break the online bank completely.

According to an article by Kiplingers.com, there are many fees that people need to start caring about. Small feels like overdraft fees, checks and postage fees, ATM fees etc. really add up. Online banks generally don’t have these fees, or they waive them specifically because they don’ t need to charge  them at all because they have  such low operating and overhead fees. Online banks provide postage paid  envelopes for depositing checks, will refund a given amount of ATM fees, generally from $3-$15 depending on the bank. Overdraft fees are also quite small. Check out this overdraft calculator from ING Direct that shows the comparison. Where  big banks charge dollars, ING Direct charges pennies.

It can take longer to deposit a check into an online bank if you don’t have direct deposit. The online bank will have you mail your checks, usually in envelopes provided that are postage free, but can easily take a week to deposit that money. In addition, most deposits are subject to a five bank business day hold before they can be withdrawn and then another two days are tacked on to start earning interest on your money. For security reasons, your initial deposit used to fund the online bank account is put on hold and unavailable for withdrawal for 10 bank business days. So plan to not use that money immediately.

Most of the disadvantages really come down to convenience. It takes a little longer to get money where it needs to go if it isn’t already online.  However, all you have to do is plan a bit, and the inconveniences won’t hinder your life at all. Online banks have come a long way, and with all the problems with traditional banks, and the speed of personal tech education, online banks are giving big banks some big competition.