Why Online Banks Are Killing Big Banks

Many young people have switched over to online banking. This is not a secret. It’s also a discussion that I’ve opened up here a few times. Why not open up the online banking vs traditional banking discussion again?

In the past few weeks I had negative experiences with both my traditional bank and my online bank.

I went to order a stack of blank checks from my local bank and they informed me that they would be charging me $35 for this (yes I know that this is clearly a rule, but I haven’t needed a blank check in so long). Instead of going through this process, I just got the information for my online banking account and passed it on to the person that required this information. Then a few days later I needed some liquid cash to pay for some second-hand textbooks I was buying. Then I was reminded that it could take up to five business days for the money from my online banking account with ING Direct to be transferred to my brick-and-mortar account. Another clearly spelled out rule. It still pissed me off though. Back to the original topic.

Why are online banks killing big traditional banks?

A customer service rep always trying to upsell.

With an online banking account, you don’t have to walk into an actual physical location. This eliminates any potential awkward moments that can occur at your local bank. Not all big banks to do this but every once in a while the local bank will try to upsell me on something (more features or a different type of account). When it comes to banking I want to be 100% comfortable and not have to worry about pushy salespeople.

Rules are not consistent.

It seems like the rules are always changing. I want unlimited ATM transactions. For the longest time I was given 10 free transactions and charged for the rest. This may seem like enough but the problem is that I do many transactions per month only (paying credit card bill, retirement contributions, etc.). I don’t want to be limited with my banking options.

Technological change.

Our generation is online. All of the time. While some of the major banks have made the switch to online, the user interface generally isn’t up to par yet. Whether you want mobile banking or online banking, the technological shift has definitely increased the amount of young people switching over to click-and-mortar bank accounts from big bank accounts.

The costs involved.

Online banking is so much more cost-effective. Having to pay for blank checks or being charged usage fees (free student checking accounts do exists) for your banking has scared many people away. Some don’t mind the extra fees because they like the personal touch of their physical bank location. I personally don’t care because I want low-cost banking with a user friendly experience online.

These are just a few reasons why I find that online banking is killing traditional banking. What do you guys think? Am I onto something or am I just a whacky personal finance blogger?

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