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Are you “afraid” of online banking?

 

Have you heard the phrase “your too busy bending over picking up pennies and your letting the dollars fly over your head”? 

I’ve had several conversations recently regarding earnings on savings and how to earn more interest. When I explain about the benefits of online banking there seems to be a sudden fear and understandably so if you are used to your local bank with trusted tellers to do your banking verses a computer, internet and no smiling face there might not be that same level of trust.

 

So how do you know if an online bank is legit? Make sure before you create any account or transfer money that the online bank is FDIC insured. They will have this on their website but you can also check them out on FDIC’s online database, BankFind. This database includes both digital only and traditional brick and mortar banks. Also, don’t click on any links in an advertisement whether its Facebook or a pop up on your computer. If you see an advertisement or want to check out a bank put their name in your browser and go to their website directly.

 

What do online banks offer that my local bank doesn’t? Higher interest rates for one. A high yield savings account online currently at this time of writing is at about a true 3.8%. For example, if you deposit $10,000 your yearly interest rate of return will be about $380 

(10,000 x .038). However a local bank may advertise they offer a 3% rate of return on savings accounts however its actually .003% (10,000 x .003=$30 per year). For an extra $350 a year I would want to learn more about online banking.

 

Other benefits of online banking are the lower fees (if any fees) and the 24/7 convenience.

 

Are there any drawbacks to online banking? Since banking is digital it can take a few days for the transfers to go through - 5 to 7 business days. Its not an issue if you plan for it, always have a buffer in your primary account for unexpected expenses and that can hold you over until that money arrives in your account. Larger expense emergencies rarely need to be paid for  in full up front. 

 

Certificates of Deposit are offered by both local and online banks. Rate of return have been competitive between both. The down side of CD’s is usually that your money is locked up for that period of time you commit to with a penalty for early withdrawal. However, they are trying to change that. Some now if the Fed interest rate goes lower than your CD you can sell it and not get a penalty, actually you can make money in this case. And I also saw one with an over 4% interest rate that was flexible; if you close it out any time after 7 days from opening it you will not get a penalty.

 

As a Ramsey Preferred Coach you know I am going to say to put your 3-6 month emergency fund in a high yield savings account, once debt free max out your 401k, and if there is anything left and you want to invest please contact your financial advisor to discuss your risk tolerance, needs and wants so they can help you build a secure future that you choose.

 

Proverbs 13:11; “Wealth gained hastily will dwindle, but whoever gathers little by little will increase it.”

 

Respectfully Yours,

Coach Jacine 

NY-12, Port Leyden, NY, USA

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