I see savings account at online banks like this one with higher interest rates. I do note the limit on the number of withdrawals per month, but that’s not a problem for me. What other disadvantages come with these sort of accounts v. one at my local credit union? Strictly for savings accounts.
With online banks, foreign exchange (of cash) is often not available, or at least not convenient.
You can’t go anywhere to demand your money.
The limit on withdrawals is a **federal **law, and affects **both **online and brick and mortar savings accounts.
The main disadvantage is that they are slightly less liquid and take a day or two to transfer into an account that you can withdraw from. If you open a checking account from the same bank, this is somewhat mitigated.
Now if anyone knows why liquid online savings accounts oftenprovide better rates than many CDs, especially short term (from OP’s link, you need to lock it away for a year to see any benefit, but other banks are even more unequal).
It’s absolutely mitigated. I bank with my insurance company (USAA) and transfers between checking and savings is instantaneous, even between other members of my family who also have USAA accounts.
Because ATM fees are reimbursed, the only disadvantage I’ve had is that these days banks don’t buy change (the old penny jar) off you unless you have an account with them.
(1) You have no good way to deposit cash because most online banks won’t take it. It can also be inconvenient to deposit checks because you may have to mail them. Some online banks provide a means of electronically depositing checks. I think mine does but I haven’t figured out how to do it so I just mail them.
(2) If you are buying a used car from a non-commercial seller, he or she can’t go to your bank lobby to get cash or a cashier’s check. You can generally only withdraw a certain amount from an ATM any day, so if you need a lot of cash in short time, you may have trouble getting it.
(3) You probably can’t get a signature guarantee. Some financial transactions require them these days. I’m not sure how I’d get one if I needed one.
Everything else about my online bank is better. For example, I can’t deposit foreign currency but I don’t need much even when I travel. I get very good currency conversion rates on my checking account ATM card. The bank reimburses even foreign ATM fees. So when I travel, I don’t get any foreign cash ahead of time, I withdraw only the foreign cash I think I’ll need, and I generally just use the ATM card everywhere it is accepted. I have very little foreign currency at the end of the trip.
I was referring to if you had an online savings account and no debit card or checking account. The main way to get it out is to transfer to a different bank, and wait a few days for that to go through.
And if you do have a checking account, the “somewhat” refers to that many do reimburse ATM fees, but not all of them, or only to a certain limit, or let you use many but not all ATM networks. Not a problem 99% of the time.
USAA of course requires you to have personal or family military links still, doesn’t it?
And yes, another disadvantage is you either have to mail check deposits and no cash, or the apps work pretty well but you obviously need a smart phone or tablet to use them. Not a problem for most people, but still doesn’t make B&M obsolete (yet).
Some banks (Capital One I think) will not charge you a foreign transaction fee, or a low one at least.
Thanks for the information, everyone. I don’t travel, and I rarely pull from my savings account (like twice in the last ten years, and had ample time to plan each) so that’s not a problem for me.
You can’t walk into your local branch and get emergency money or sort out some problem.
You can use the bank for a notary service (just use one of the dozens of others that are probably very close to you).
I last needed notary services a decade ago or more, and was surprised that Citibank didn’t offer that service any more. (Fortunately, another tenant in my building did that for a living.)
I find Ally Bank to be convenient.
The main issue I had was the additional checks one has to go through to set up the account. Since they can’t see you in person, they require more paper. It took longer but wasn’t a problem.
Some of them won’t, no. Others do have agreements with brick-and-mortar banks allowing you to use their ATMs to deposit cash (and cheques).