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Online Banks Still Have 3 Big Shortcomings

Online banking is largely great – you can earn more interest on savings accounts and CDs, get 24/7 customer service, avoid checking account minimums and monthly charges, and get reimbursed for ATM fees.

I’ve used online banking exclusively for years and enjoyed all of these perks.

However, even though online-only banks have been around for more than a decade, there are still key areas where their services fall short:

Solving time-sensitive problems when there’s no branch can be difficult.

My husband and I both had problems contributing to IRA accounts at an online bank when we waited until the deadline and couldn’t get money into our accounts or submit the required paperwork quickly enough. If we had a traditional bank, we could have made up for our procrastination by going to a physical location and taking care of the transaction right then.

The best way to avoid this problem is to be aware of banking tasks that are time sensitive and not put them off until the last minute. Online banks aren’t necessarily equipped to handle requests on short notice.

Alternatively, you could join a credit union anywhere in the country that offers similar perks to online banking but also has shared branching in your area so that you can do banking tasks in person when you need to.

It’s hard to quickly access large sums of cash for big purchases or emergencies.

My husband and I wanted to buy a car when our old one unceremoniously died on the freeway during rush hour after putting in 170,000-plus miles. We preferred buying something used rather than paying a premium for a new vehicle.

However, we couldn’t access enough cash quickly enough to buy the make and model of used car we wanted from a private party. We couldn’t get a cashier’s check issued from our online bank fast enough to keep the desirable cars from being sold.

We also didn’t want to keep a large amount of cash around the house while we waited for the right deal to pop up on Craigslist, and – of course – you can’t withdraw that kind of money from an ATM.

So we wound up paying a premium to buy the car we wanted through CarMax. We got it home by signing on for the dealer’s expensive financing, then quickly paid off the loan within the 3-day, no-penalty time frame by borrowing from family.

We then wrote a check from our online-only bank to pay back our family.

This process could have been much simpler if we’d used a brick-and-mortar bank. Back when I banked at Washington Mutual, I found a used car I wanted to buy, called my local branch and told them I’d be stopping by in a couple of hours to pick up $6,000 in cash, and they had the money waiting for me when I arrived.

One solution is to maintain the least expensive account you can find at a local bank or credit union (or a credit union with shared branching) so you can wire or ACH transfer yourself money (or even withdraw large amounts of cash) for occasions like these.

It could take a week or more for your deposits to post and for you to get access to your money.

Before our online bank offered online check deposits, we had to mail our checks across the country for deposit. That meant waiting a week or more just for the bank to post the deposits to our account, plus the additional days for all the funds to become available.

When our bank finally began offering online deposits, the process was incredibly clunky. I could easily spend 30 minutes to an hour scanning and depositing a few checks.

With careful planning, these deposit delays won’t necessarily cause a major disruption. That said, we’re all susceptible to cash crunches that make quick deposits a necessity.

Make sure to choose an online bank that has a fast, up-to-date system for depositing your checks online or through your smartphone if you can’t wait up to two weeks for your deposited checks to clear.

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