Would You Trust an Online-Only Bank? Here’s What You Should Know

Choosing a bank account is a big deal. After all, you’re handing the institution what’s most likely the majority of your money for safekeeping. You want to make sure it’s actually safe.

You also need to be able to access that cash for all your day-to-day operations, like paying bills or coughing up for your share of the pizza.

Along with choosing from multiple financial institutions, banking in 2019 and beyond means making another important decision: Will you use of one of the many all-digital, online-only banking options, or will you keep it old school by opening an account at brick-and-mortar facility?

Are Online Banks Safe?

In a recent survey conducted by The Penny Hoarder, more than 50% of respondents said they wouldn’t consider using an online bank, and more than 19% were unsure about using one. Given how much of our lives are conducted online these days, we found that data point surprising.

But on the other hand, we do understand having reservations when it comes to money matters. Walking into a stately, brick-built bank can make it feel less scary to hand over your hard-earned cash.

So are online banks safe? The truth is there are a growing number of online-only banking alternatives that are, indeed, legitimate and safe. Online options like Chime and Simple are FDIC-insured for deposits up to $250,000, just like Bank of America and Chase.

And thanks to the magic of technology, you can do pretty much everything you might need to with your money without ever needing to visit a teller in person: depositing checks on your mobile phone, pulling cash from a network ATM or transferring funds to a family member or friend. You can even write paper checks… if you really, really have to.

It’s true, however, that you won’t be able to walk into a bank and talk to a teller in person. What are the other important differences between these two methods of banking?

Brick-and-Mortar Banking: Pros and Cons

Since nearly 72% of our survey respondents said they’d visited a brick-and-mortar bank in the past year, we want to give this option its due. Here are the drawbacks and benefits of patronizing and old-school bank — the kind you can walk into to open your account.

Traditional Banking Pros

• Larger banks may offer “one stop shopping” for your financial needs: They often make it easy to take out a mortgage, open a credit card, or apply for a personal loan with the same institution you bank through. (However, these products may come at higher fees than you’d find by shopping around for independent lenders.)
• Some users simply find it easier to walk into a bank and ask for the service they need. This may be a better option for you if you don’t like figuring out how to get what you need through an online banking portal or app.
• Depending on the bank you choose, you may be supporting a local (or local-ish) business, or at least a nationwide business that provides jobs in your area. Credit unions in particular are often community-focused institutions that participate in local events and provide friendly, face-to-face customer service to account holders.

Traditional Banking Cons

• Again, depending on the bank you choose, you may only be able to access your bank locally. That can present problems for those who travel or eventually plan to move out of state.
• Large banks often have higher account maintenance fees and other associated costs. After all, they have to keep the lights on at an in-person banking facility. Furthermore, the amount you stand to earn through interest-accruing savings and checking accounts may be lower than what you’d get from a digital-only bank.
• You’re probably already doing most of your banking online. In fact, more than half of our survey respondents said they do most of their banking online or via mobile app. And at an in-person bank, particularly a small or local one, the online banking portal or mobile app won’t be quite as spiffy as the tech tools you’ll find at a bank where those tools are the primary way to access and interact with your cash.

Online-Only Banking Pros and Cons

So what about digital-only banks? What incentives can they offer to outweigh the drawback of not having a physical location — and what other drawbacks are there?

Online-Only Banking Pros

• Because they don’t have as much overhead as banks with physical facilities, online banks frequently offer lower-cost banking options. Many have no monthly maintenance fees or balance requirements.
• With an online bank, your money goes with you everywhere. You’re not tied to the physical location where your bank has branches. Many online banks allow you to access your cash through a fee-free network of ATMs that stretches not only across the country, but overseas as well, and you’ll always have access to the tools available on your computer and smartphone.
• Some online banks and alternatives do offer other financial products, like mortgages and student loan refinancing. For example, check out Ally and SoFi, which also offer investment products, educational resources and more.
• Many online banks offer a suite of digital tools to help you take charge of your finances. These include built-in budget trackers, automatic savings, and integration with popular third-party apps like PayPal or Venmo. While brick-and-mortar banks are also catching on and adding in these extras, all-digital banks tend to have the leg up on these sorts of forward-thinking extras.

Online-Only Banking Cons

• No in-person banking option. If you’re set in your ways and don’t want to have to move through the learning curve of figuring out a digital bank’s tools, a brick-and-mortar bank may be easier. (That said, even big chains are installing souped-up ATMs and routing much of the queue to the machine rather than having them interact with tellers… so in the end, you may not really have a choice!)

What to Consider if You’re Looking for a Bank Account

No matter which kind of banking option appeals to you best, keep in mind that not all banks are created equal, whether they inhabit real space or cyberspace. It’s important to thoroughly research all the features and policies of your potential bank account before you sign the paperwork.

Looking for a new home for your cash? Check out our reviews of the best checking accounts and savings accounts on the market today.

Jamie Cattanach’s work has been featured at Fodor’s, Yahoo, SELF, The Huffington Post, The Motley Fool and other outlets. Learn more at www.jamiecattanach.com.

Chime® is a financial technology company, not a bank. Banking services provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC. The Chime Visa® Debit Card is issued by The Bancorp Bank, N.A. or Stride Bank, N.A. pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted. The secured Chime Visa® Credit Card is issued by The Bancorp Bank, N.A. or Stride Bank, N.A. pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted. Please see the back of your Card for its issuing bank. 1 Early access to direct deposit funds depends on the timing of the submission of the payment file from the payer. We generally make these funds available on the day the payment file is received, which may be up to 2 days earlier than the scheduled payment date. 2 Out-of-network ATM withdrawal and over the counter advance fees may apply except at FCTI® ATMs in a 7-Eleven® or Speedway, or any Allpoint® or Visa® Plus Alliance ATM participating in the Allpoint network. 3 SpotMe® on Credit is an optional, no interest/no fee overdraft line of credit tied to the Secured Deposit Account. SpotMe on Debit is an optional, no fee service attached to your Chime Checking Account (individually or collectively, "SpotMe"). Eligibility for SpotMe requires $200 or more in qualifying direct deposits to your Chime Checking Account each month. Qualifying members will be allowed to overdraw their Chime Checking Account and/or their Secured Deposit Account up to $20 in total, but may be later eligible for a higher combined limit of up to $200 or more based on member’s Chime account history, direct deposit frequency and amount, spending activity and other risk-based factors. Your SpotMe Limit will be displayed to you within the Chime mobile app. You will receive notice of any changes to your SpotMe Limit. SpotMe for Credit and SpotMe on Debit share a single SpotMe limit. Your SpotMe Limit may change at any time, at Chime or its banking partners’ discretion. Although there are no overdraft fees, there may be out-of-network or third-party fees associated with ATM transactions or OTC cash withdrawal fees at retailers. SpotMe won’t cover non-card transactions, including ACH transfers, Pay Anyone transfers, or Chime Checkbook transactions. SpotMe terms and conditions. Eligible members may be offered a $20 - $500 Credit Limit per pay period. Limits may be impacted by your use of other Chime products. Your Credit Limit and Maximum Available Advance will be displayed to you within the Chime app. MyPay is currently only available to eligible Chime members in certain states. Other restrictions may apply. See Bancorp MyPay Agreement or Stride MyPay Agreement for details. 4 To apply for a Chime Card, you must also open a Chime Checking Account. 5 The Annual Percentage Yield ("APY") for the Chime Savings Account is variable and may change at any time. The disclosed APY is effective as of 1/29/26. No minimum balance required. Must have $0.01 in savings to earn interest. 6 Round Ups: Round Ups automatically round up debit card purchases to the nearest dollar and transfer the round up from your Chime Checking Account to your savings account. 7 Auto Savings: You can automatically transfer part of your direct deposits of $1 or more from your Checking Account into your selected Chime account(s).

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