5 Disadvantages to Online Banking

Brent Pittman —  07/10/2012

ATM’s are your ‘teller’ if you bank online.

Let me start off by saying I love banking online and wouldn’t go back to using a brick and mortar. We have had an online savings account with ING for 5 years and online checking for about 2 years.

There are tons of advantages like remotely depositing checks with your phone. Yet, I am frustrated by a few limitations of online banks.

5 Disadvantages to Online Banks

There are only a few hassles when dealing with online banks, but hassles nonetheless.

1) Depositing Cash– While we don’t have huge influxes of cash, there are times when I’d like to deposit cash directly into our account.

I can ‘smuggle’ the money through a series of linked accounts (we have one traditional account open for such purposes), but this is an annoying multi step process.

On second thought, I wonder if I can deposit cash via ATM into my online account….has anyone done this?

2) Medallion Stamps- An online bank doesn’t have the ability to give medallion signature stamps that are needed for investment transfers or even name changes on investment accounts. A bank you have an account with will usually waive any fees ($15-$20) for the stamp.

3) Withdrawing Cash- While our ING account has free ATM withdrawals at many locations, there is a daily limit to how much cash you can take out.

Currently that limit is $1,000 per day for ING Direct and the owner of the ATM machine can set a max withdrawal per transaction. If you’re needing a lot of quick cash, you’ll need to plan ahead.

4) Cashier’s Check- If you’ve paid for a used car or expensive item it the owner probably required a cashiers check or certified check from a bank. Rightfully so! Again, you’re out of luck if you only have an online bank and will have to jump through some transfer hoops to get that certified check.

5) Holds on Check Deposits– I personally don’t have a problem with the 1-2 day holds put on the checks deposited, but I have found it annoying a couple of times. We also have same problem with our brick and mortar bank with holds, so it seems like an industry standard to hold funds from a deposit at a whim.

Some might have a problem not dealing with a live person for customer service issues. I’ve never had a problem with customer service issues with our online bank, but I would have no problem dealing over the phone or in a live chat/email. I don’t think customer service is a reason to avoid using an online bank.

While I enjoy the ease of our online banking experience and higher savings rates, there are certain annoyances that force me to keep a traditional brick and mortar account open.

What annoys you about banking online or keeps you from opening an account online? 

Photo Credit mag3737 (Creative Commons)

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Brent Pittman

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Brent is a financial coach and writer looking for the perfect donut. He believes personal finance should be both fun and accessible to anyone willing to learn.
  • Brent, if you need me to, just send me the cash and I’ll take care of it. Seriously, though, I love our Perkstreet account but we have had to leave one Brick and Mortar bank account open for those times when we are paid for something in cash and, I agree, that multi-step process is annoying. Overall, though, for us that is a small annoyance compared to the things we faced with “regular banks”. In fact, we may even close our local bank account and purely use our Perkstreet and ING accounts.

  • The higher savings rate is a big reason. I’m getting interest on checking and savings with 0 fees and 0 ATM fees. Looks like I need to do a mirror article!

  • Nice! Do they accept coin too? How is their saving % rate?

  • I love my Chase account for checking. As long as I don’t have to pay the monthly $10 fee (which is avoidable if you have a $500+ direct deposit each month OR keep a balance of at least $1k a day), I will keep banking with them. I keep my online savings acct with ING though.

    • I know its hard to keep ‘free’ checking now. If you’re self employed the direct deposit option goes away, so your stuck with a lot cash sitting to avoid the fees.

  • Brent, I don’t know a lot about this, but I think some banks now are accepting deposits through an electronic image of a check! Have you heard of this, and if so, what do you think?

    • Hey Kurt! I think Brent was referring to plain ol’ cash. You can’t really deposit cash into an online checking account, unless they are partnered with someone else. I think I recall that you can deposit cash at FedEx or UPS if you have an ING checking account…not sure if that is correct. I guess the other way to deposit cash would be to deposit it into your brick & mortar bank, and then write a check to yourself and take a photo of it so that it deposits into your ING or whatever online bank account you use.

    • Kurt, Yep ING does accept remote deposit of checks. I think I linked to it in the article. Here it is again. http://www.ontargetcoach.com/deposit-your-checks-remotely-deposit-with-ing/

      I was speaking of cold hard cash. Years ago my wife was a barista, so we had $2,000+ in cash and coin each year to deposit….that’s difficult with online banks.

      • Thanks much, I gotta read more carefully! 🙂

  • krantcents

    I agree and these are some of the reasons I do not have an online only account. My brick and mortar bank treats me fine. If not, I know how to resolve most problems.

    • I really love our online account, it’s just not perfect.