The Rachel Cruze Show - Is It Wise to Keep Your Money in an Online Bank?

Starting point is 00:00:01 Well, hey you guys. So a lot of things have changed over the years when it comes to money. And one of the advancements that we've seen increase a lot is when it comes to online banking and all the options that are out there. So investing apps, you know, to digital banking services. There is so much to learn about this landscape. And I want to make sure that you have all the information you need to make sure that you are keeping your money in the right place. So today, I want to share some of the basic pros and cons of online baking versus using just a traditional brick and mortar bank branch. And spoiler alert, I use both of these. So stick around to see what I recommend overall. And if you enjoy this content and want to see more, be sure to hit that subscribe button. That is so, so helpful. All right,

Starting point is 00:00:51 the first pro to online banking is that most are FDIC insured, which means that your money is guaranteed to be safe. I think sometimes the online banks, people like, okay, can I trust them? Are they legitimate? But do your research. Check into the specific one that you're looking at. But you will see that majority of them, yes, are insured. They're fine. They're just like another bank. Your money will be safe. Now, another pro to online banking is that they typically have higher interest rates. So on the savings side, this is a great thing because when it comes to savings accounts, money market accounts, high yield savings accounts, this is a benefit that you will get from online banks over brick and mortar. And simply because they don't have as many expenses

Starting point is 00:01:38 that they have to keep up with, you know, brick and mortar traditional bank, people are there full time, you know, they're in person, there's actually a building, there's a lot of expenses that come along with that. And when it's just strictly online, they can save a lot of money that way. And the great thing is, as a customer, sometimes you get the better end of that deal because they're able to have higher interest rates. So again, when it comes to those money markets and especially high-yield savings accounts, online banks are great when it comes to this. Now, the third pro to online banking is that the platforms are often easier to navigate. So I don't know about you, but we do use a brick-and-mortar bank for our checking. Sometimes it's just wonky. Like the experience there

Starting point is 00:02:18 versus online, they are so user-friendly. I mean, they have to be because they are, you know, an online bank. it is easy to access your information, to look at your records. I mean, the user-friendlyness of online banks is beautiful and wonderful, like the interfaces, the apps, all of it is really, really well done, usually compared to traditional banks. All right, one con when it comes to online banking is that moving your money from account to accounts sometimes can take a little longer than a traditional bank. So when you need access to this cash, it could take one to two business days, either to get it transferred over to another account or again to get what you need out of it. Now, some online banks

Starting point is 00:03:01 will come with a debit card that you can use, you know, use for so many transactions. And so obviously you can get to money quickly that way. Winston and I have an online bank that we use for our high yield savings account. And if we have to transfer money from that to our checking account because we're doing something, some type of transaction, it will take one to two business days. And it sometimes can stress me out. But again, we get a higher interest rate there. So it's great. I'm great having money parked over there, but you just have to plan ahead. All right, the second con is a lack of face-to-face troubleshooting when it comes to problems that you have. So again, the great thing about a brick and mortar bank is you can drive down to the branch and see a person and actually

Starting point is 00:03:40 talk to a person and get what you need fix there. And sometimes that's just faster. You know, we had a situation where we had to change a checking account and it was getting really complicated. And so we just went down to the bank and just did it in person. And it was so fast, so simple. Again, it can be a little inconvenient, but sometimes you can get your problem solved faster. Versus an online bank, you're going to have to find customer service. You're going to have to go, you know, call a line. And sometimes it takes forever. Sometimes their customer service isn't as good of getting an actual person.

Starting point is 00:04:10 But again, it can still be worth it. Right, in the same vein, because online banks are newer, it's kind of a newer option, companies that may not quite have all the kink straightened out. So again, there's a little bit of a give and take because there are some online banks that are popping up, which are great. And again, it's not that they're wrong. But again, the newer the bank, the more like, okay, ups and downs could happen, whether that's actually like the interface of what you're using the bank for

Starting point is 00:04:37 when it comes to an app or a website or just different things can happen, right? So when you have something with a long track record, they have usually worked through a lot of things going on so that you can actually, you know, get a smooth process. So again, if a bank has been around for 50 years, usually they have a pretty, you know, easy process. But if it's a newer thing starting up, just know there could just kind of be some starter problems and just be aware of that. All right, the third con for online banking is that there is less ATM access and sometimes more fees. So brick and mortar banks, again, have their own

Starting point is 00:05:09 ATM machines free of charge 24-7. But with online banks, again, sometimes you have to use other ATMs, and there's going to be some fees attached to that. Now, there are some online banks that are affiliated with brick and mortar banks, which is great, but not always the case. So if you do need cash and if you use cash, you know, whether, again, it's for tips or like whatever you need it for things that happen, you probably will pay a hefty fee to use another ATM. Okay, so at the end of the day, here is how I use both. So online banking is for our short-term and emergency fund savings. So again, these high-yield savings accounts that we were talking about, this is where we keep most of our saving. So we have some short-term savings that we're using. We're not putting in investments.

Starting point is 00:05:52 We just have cash on hand for things that we're doing around the house and different things. And then we also have our emergency funds. So these are in our high-yield savings account. And again, we don't really use it unless we're having to take some money out of that savings account to put into our checking account if we're doing things like around the house that we need that money for. But for our everyday spending, you know, I mean, gosh, for food and electricity and like all the things. We just have a checking account with a traditional bank. And I've been with this bank for like 10 years. And I'll just be honest, it sounds like a lot of work to change it up. But I do like having an actual place I can go if I need something. It's kind of old school. But it just feels

Starting point is 00:06:34 more established. It just makes me feel comfortable. So our checking account and all of that is with a traditional bank. And then our savings is with an online bank. And again, when it comes to those high savings and money market accounts. Remember, you can't use those as a checking account because they will put a limit on how many transactions that you can do per month with those. So looking for just a traditional checking accounts. That's why I like having a brick and mortar bank. All right, I hope this was helpful when it comes to information because, again, there's so much that swirls around in this world. So hopefully that kind of gave you a good list to kind of figure out, hey, what is right for me and our family. So make sure to share this episode with a friend who likes to know all the

Starting point is 00:07:11 details when it comes to their money and even technology. And if you take away just one thing from today, it's to make sure that you keep your emergency fund in the right account. And that is what I explain on my episode. You can check it out right there. Or if you're listening on podcast, click the link below. All right, you guys, remember to take control of your money and create a life you love.

The Rachel Cruze Show - Is It Wise to Keep Your Money in an Online Bank?

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