Online Banking: My Opinion Based On My Experience. Or Why You Need To Take The Plunge!
The choice of online banks in UK is vast. And their offers are varied and competitive. Not to mention very limited fees. That’s why you should take the plunge. Here is my opinion based on my experience.
A few years ago, after too many years of fallow land, I decided to take control of my finances …
Note that I have always had rather reasonable expenses. But not to be very (too) spendy is one thing, managing your money properly is another. Not to mention knowing the distribution of your spending items, having a budget forecast and investing intelligently.
To cut a long story short, I was a bit of a judgmental sailor and I regularly had a lot of cash sleeping in a current account. An aberration …
In order to correct this and get my finances back under control, I essentially undertook 2 concrete steps:
- train myself by reading books and websites.
- migrate to online banking
The first point is obvious when it comes to seriously embarking on a new field or a project of some importance. Money and personal finances undoubtedly fall into this category.
The second point, for its part, has been essential to be truly free, autonomous and responsible.
Like many, the bank I used was a traditional, street-front bank. In fact, it was the bank used by my parents. They had opened a securities account for me there and, of course, I started with them.
Since then, as in many other areas, the Internet has been there. And that has completely changed the banking business.
First of all because the sources of information and training have multiplied. As is often the case, you have to know how to separate the good from the bad. But your banker is no longer the only one who can give you information.
Second, a new type of bank has emerged: online banking.
Of course, traditional banks have gone online. But online banks go further: they don’t have a physical branch, and exchanges are only done over the Internet and by phone.
For my part, I crossed over 10 years ago. And I’m very happy about that. It’s as much about moving to an online bank as it is about my online bank.
So in this article I would like to share my views on online banking, based on my own experience. Although interesting for you (at least, I hope so), it is also the limit of this approach. For it is never just one case based on a particular Internet bank.
But if you can be reassured or find arguments to jump the gun, this article will not have been in vain.
Moving to online banking? What a horror!
No longer being able to meet your banker in person can seem frightening. I can see that. And that’s the argument I’m regularly confronted with.
But ask yourself these two questions:
- How often do you meet with your banker?
- Why do you meet with your banker?
The answers are very often “quite a few” and “for day-to-day business” …
Of course, there are some cases that require someone to be in front of you. But in most cases, it’s not.
On the other hand, you surely think that, having more training, information and tools at his disposal, he will necessarily be good advice.
This is not entirely untrue. But it’s not always true: I’ve heard a lot of dumplings coming out of advisors’ mouths…
And there is one essential aspect to remember.
Your banker has a double hat.
The first is that of advisor. That’s who you’re here to see. But he also has another hat: that of a salesman for his employer, your bank. You don’t come to see him in particular. But he’s always behind your advisor. And the relevance of his advice is therefore suspect, because he will seek to defend his employer’s interests at least as much as yours.
In other words, one of the main advantages put forward by traditional banks … is, at best, of no use to you.
The advantages of online banking
On the other hand, online banking has many real advantages.
Low bank charges
The very first is their low cost. For equivalent services, they are much cheaper. And for improved services? Well, they are still cheaper!
I’ll take two examples:
- In my traditional bank, my credit card fees were £9 per month. In my online bank, they are £1.5 per month, or £18 per year. In 2 months and with equivalent services, my traditional bank was as expensive as my online bank over the whole year.
- Passing in the vicinity of the branch of my traditional bank, I decided to stop there to make a transfer. The terminals being busy or out of order, I turned to the bank agent who was resting at the reception desk. The transfer was made. And it cost me the trifle of £3.50. Of course, the agent hadn’t informed me of his charges…
The second example is surely peculiar.
- First of all because there is no equivalent in Internet banks: you can’t go near them. In fact, in a way, you are always close to your bank 🙂
- Secondly, because a traditional bank offers this transfer service on its website and is therefore in line with Internet banks.
- However, it also shows that you are paying a high price for the advantage that a traditional bank is supposed to offer you.
The first one, on the other hand, is very telling and traditional.
This highlights a real trend: for the vast majority of everyday banking transactions, online banks offer extremely low and very competitive rates, with a large proportion of services free of charge.
Moreover, where internet access is charged at traditional banks, it is free and complete, in terms of service, at online banks.
I could only speak for my online bank. But in almost 10 years, there is not a transaction I have not been able to make online, nor a statement I have not been able to consult online. And all this for £1.50 a month.
Attractive savings products
The second asset is the attractiveness of their savings solutions.
Most of them offer the traditional Livret A and LDA passbook savings accounts. This is a good thing. However, on these products, there is no competition.
Where online banks stand out is, for example, in life insurance or passbook accounts. The return on their various savings solutions is often better, with attractive interest rates.
Above all, the associated bank charges are lower. Or even zero.
This may seem secondary. But it’s actually very important.
Let’s imagine this fictitious situation but not far from reality …
- A traditional bank offers a life insurance with a profitability of 3%.
- An online bank offers a life insurance with a profitability of 4%.
- At first glance, the difference is only 1%. But this already represents 30% more profit for the online bank. But if you dig deeper…
- The traditional bank charges a fee of 1%. Profitability drops to 2%.
- Online banking charges 0%. Profitability stays at 4%.
- So the difference in profitability is 2%. We thus go from single to double. And that is 100% more profit for online banking.
Savings and investment offers can therefore enable you to significantly increase or even double your earnings. Over a period of 10 years or more, with the power of compound interest, this is not negligible.
In other words, online banks have a very wide, varied, cheap and above all profitable range of offers.
Their third asset is the autonomy they allow.
The preferred medium of online banks is their website. Unlike branches, these sites are operational 24/7, i.e. 24 hours a day for every day of the week.
You no longer need to worry about any schedule: you set it!
All operations are possible online, from these websites. There is no need to ask for an extra service package: all traditional operations are available right from the start. As well as all the others.
And, once again, the vast majority are free to use.
Most traditional banks are going online. But, from experience, their offer is never so complete, flexible and available.
In addition to this, there are other elements:
- You can’t meet your advisor but you can call one: all online banks offer a telephone number that can be reached during extended opening hours.
- You can take your bank in your pocket: all online banks offer a smartphone application from which you can carry out the vast majority of transactions. Let’s be honest: all banks offer such an app. But given the strategic importance of Internet banking, their applications are often better designed and more comprehensive.
One last point: if necessary, my bank will call me back after my first phone applet. I don’t know if this is true for all Internet banks, but it is for mine. I’ve seen it twice.
My opinion on online banking
I wouldn’t go so far as to say that online banking is a blessing. But close to it 🙂 In any case, I have never regretted giving up my traditional bank for an online bank. And I am satisfied with my bank in particular.
Is my opinion convincing?
As mentioned above, this is the unique opinion of an individual like so many others who has only ever tested one online bank.
However, as an individual, I have tried 3 different traditional banks, and several different branches. And around me, I have been able to form my own opinion on 3 other different traditional banks.
None of these 6 banks, regardless of the branch or advisor, made me regret or think about switching to an online bank.
Why am I satisfied with my online bank?
- Because it saves me money.
- Because it has nothing to be ashamed of in terms of offers.
- Because it is available and reachable when I need it.
- Because I don’t miss an advisor: at best he’s useless to me, at worst he’s dangerous (once again, I’ve heard advisors talking a lot of crap to me).
On this last point, I can see that you might have some fears. Here are a few tips to help you put these fears into perspective:
- Ask yourself again how many times you meet him
- Ask yourself again why you’re meeting with him…
- Consider the savings you can make.
- For starters, test out an online bank before you give up your current bank altogether. If you don’t agree, you can back out and you won’t have lost anything.
Online banks today offer a real alternative to traditional banks because they are reliable and competitive. And there are enough online banks in UK for you to find the right shoes for your feet.
My advice: compare, make your choice and go for it!