3 Potential Drawbacks of an Online Savings Account — and How to Cope With Them

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Online banks can sometimes complicate your finances. Keep reading for online savings pitfalls that can be avoided with a little legwork. [[{“value”:”

Gone are the days when we were all limited to the banks that had branches in our neighborhoods. Now, you can open a bank account on the internet, without even putting shoes (or pants) on — what a time to be alive.

Online banks have a lot of positives, but if you’re a fan of traditional banks, the learning curve may be a bit steeper for you. Here are a few pitfalls to watch out for if you’re opening an online savings account.

1. No in-person customer service

I’ve never needed to visit a bank often enough to develop a personal relationship with the staff working there, but my life might not be the same as yours. If you’ve come to rely on in-person customer service for your banking needs, the changes that will come with an online savings account might be hard for you to stomach. Online banks exist solely in cyberspace — you will not find branches you can stop into for a chat about an issue with your account. What can you do if you need help or have questions?

Coping mechanism: You might not have a branch to visit, but online banks offer robust customer service options that are likely more accessible than banker’s hours. You can reach your online bank via phone, online chat, and through its mobile app.

2. Your account doesn’t come with an ATM/debit card

This one is definitely a bummer — generally speaking, online savings accounts don’t come with an easy way to get cash out. On its face, this makes sense — ideally, you’re putting money into a savings account far more often than you’re taking it out.

You also can’t spend directly from a savings account; you’re limited in how many “convenient” withdrawals you can take per month, thanks to Regulation D rules that some banks still enforce. But if you’ve been saving for a large purchase and now it’s time to make the buy, how are you going to get your money?

Coping mechanism: Online banks make it extremely fast and easy to open a new account, so take advantage of this and open a checking account that’s linked to your savings account. You’ll get an ATM/debit card with your new account, and you’ll easily be able to transfer money back and forth between the accounts.

When it’s time to take cash out, pop into that mobile app or sign into online banking on your computer and transfer money from savings to checking. Just be careful to stay under your transaction limit every month, lest you be hit with fees.

3. A lack of convenient ATMs

Another hurdle for an online savings account is needing to find an ATM so you can take cash out. Many online banks are part of an ATM network, and they offer a map function on their websites so you can type in your ZIP code and see where the closest ATMs are to you. But what if your area has no ATM coverage for a given bank?

Coping mechanism: If you regularly deal in cash and anticipate needing to take it out frequently, it’s worth investigating prospective online banks to see their ATM coverage before opening an account. Some online banks also offer ATM fee reimbursement up to a certain dollar amount (such as $10 or $20) per month, so you can use an out-of-network machine and not lose any money as a result.

Are online savings accounts still worth it?

Honestly, if you are reasonably comfortable with doing your banking activities online, you’ll find a lot to like about an online savings account. Because online banks don’t have to operate physical branches, they save a lot of money on overhead costs — which means they can pass those savings onto consumers.

This is why online banks offer much better APYs on savings accounts, CDs, and money market accounts — and sometimes even on checking accounts. As of this writing, the average APY on a savings account is just 0.47% (according to the FDIC) — but you can find online banks offering rates 10 times that, or even more!

Another way online banks can help your bottom line is the lack of monthly maintenance fees. A lot of big brick-and-mortar banks charge these on their accounts, unless you can jump through certain hoops to get the fee waived. And if you accidentally let your balance fall too low or cancel a recurring direct deposit, boom, you’ll be hit with fees again.

Online savings accounts do come with a few potential pitfalls, but now that you know about them, you’re better equipped to take advantage of the benefits of banking in cyberspace. Just do your research before opening an account — I recommend checking out The Ascent’s list of the best high-yield savings accounts to get started.

These savings accounts are FDIC insured and could earn you 11x your bank

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