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Features and Benefits of Online Banking

Pros and Cons of Using an Online Bank


Online banking gives an accurate picture of your financial accounts.

Log On to Online Banking

Getty Images / Daniel Berehulak

Online banking is just what it says: banking activities that are carried out over the internet on a secure website.

Online banking developed in the late 1990s and grew more popular over the years as more financial institutions offered the service, which became more and more secure to use over time and customers trusted and adapted to using online banking to manage financial transactions. The first online banking websites were offered by traditional brick and mortar banks and offered viewing of account transactions and balances, the ability to transfer funds between accounts held with that bank, and a way to apply for loans and open savings or checking accounts. Shortly after banks started offering online banking, online brokerages started opening banking services to customers as well.

Today, banks that runs exclusively online that have no physical branch buildings exist. Due to having lower overhead costs, these banks typically offer higher interest rates on savings accounts and may offer lower interest rates on loans.


The features offered through online banking are the same or nearly the same as services offered by a physical bank, with some additional services listed below:

  • View account balances, which are updated daily.
  • Apply for credit cards and pay credit card balances by transferring funds from savings or checking accounts.
  • Transfer funds between savings and checking accounts.
  • Contact customer service via chat or secure email from the website to resolve problems and have questions answered.
  • View detailed information about types of accounts offered and fill out an application for accounts.
  • View cancelled checks and monthly and yearly account statements.
Features that are exclusive to online banking that you can't get with a traditional bank include:
  • Use features almost 24 x 7, Sites are infrequently down in very early morning hours for maintenance, customers are notified ahead of down time.
  • Pay bills without writing out and mailing a check with online bill pay.
  • Download transactions to desktop personal finance software for Windows or Mac.
  • Some online banks offer budgeting tools, graphs for analyzing spending and incentives for saving money (SmartyPig, for example).
  • Online banks provide ATM cards so you can withdraw cash, and most reimburse you for all or some ATM transactions made at others bank's ATMs.
  • Most online banks also have free smart phone apps for iPhone and Android, so you can conduct banking activities anywhere. The apps usually let you deposit checks by snapping a photo of a check.
  • If you don't have a smartphone, most online banks let you check balances, view recent transactions and handle a few other matters using text messaging.
Drawbacks to Online Banking

Obviously, online banking saves a lot of time and keeps you more in touch with your finances, but it has a few inconveniences:

  • You can get traveler's check from most financial institutions that offer online banking, but not always.
  • Cashier's checks require an ID and can't be secured via online banking.
  • If the bank doesn't provide mobile app with check deposit capabilities and it's an online-only bank with no branches, you have to mail in checks for deposit.
  • If the bank doesn't offer a mobile app or you don't have smart phone that works with the apps provided, you'll have to go to a branch office or mail in checks for deposit.
  • Cash has to be deposited at a branch or ATM, or if you use an exclusively online bank you'll still need a savings or checking account at a local bank to handle cash deposits and then transfer funds to the online bank.

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