Personal Finance

3 Reasons Online Banks Are Better Than Credit Unions

Feb 14, 2020

If you’re searching for a new home to store your cash, credit unions may come first to your mind. While credit unions have their benefits, online banks have several advantages that make them the smarter choice. With fewer costs, better rates, and user-friendly features, online banks are a step above credit unions.

In this post, we will highlight why you should consider making an online bank your first choice for your primary bank.

1. Fewer Fees

Traditional banks are notorious for high fees that leach money out of their customers. After all, they have a large number of overhead costs that need to be funded. One of the biggest reasons that traditional banks rely so heavily on their fee structure is because they have physical branches that need to be maintained.

Similarly, most credit unions have physical branches and other overhead costs. Although credit unions often charge less than a traditional bank, they still need customer fees to stay afloat. In contrast, online banks are able to charge fewer fees because they have fewer overhead costs. Without brick-and-mortar branches, they are able to slash consumer costs while still providing an outstanding customer experience.

Most online banks offer a variety of accounts that don’t require any fees whatsoever. For example, Axos Bank’s Essential Checking provides a fee-free checking account for customers. That means customers pay zero service fees, zero overdraft fees, and zero non-sufficient fund fees with no minimum balance requirements. Plus, Axos Bank provides unlimited reimbursements of domestic ATM fees.

2. Better Rates

In addition to offering lower fees, online banks are able to offer better rates. This is due to the low overhead costs that allow online banks to provide more affordable options to their customers.

If you are attempting to save money, then you’ll know that finding a high-interest savings account can be very difficult. However, online banks are able to offer attractive interest rates on their high yield savings accounts. For example, the Axos Bank High Yield Savings Account currently offers industry-leading rates with a minimum open balance of only $250.

3. Better Tech

Online banks are known for being tech-savvy. After all, they run entirely online so they need to make sure everything is very user-friendly. The main focus of an online bank is to create the best possible experience for its customers, no matter where they are in the world.

In contrast, credit unions are typically slow to adopt new technologies. Instead of forging a trail into better user experiences, they usually add new features slowly. A few features to which you may not have access at a credit union include:

Peer-to-peer payment options
Transaction alerts
Account balance alerts
Automated bills
Mobile-friendly banking
Remote check deposit

Another feature you might miss out on is early direct deposit. Axos Bank is one of the few banks to offer customers the ability to receive their paychecks up to two days earlier than a traditional bank. Very few credit unions offer this useful feature, which means a missed opportunity to access your hard-earned money faster.

The Bottom Line

Online banks are becoming more popular every day. In the past, many consumers felt stuck at their traditional bank or credit union simply because there wasn’t another choice. Because of this, customers were forced to pay high fees and accept outdated tech as the norm.

However, that is starting to change. As consumers start to realize that there is another option, online banks are getting recognition for the powerful tools that they are. As an online bank customer, you can avoid fees, access better rates, and enjoy a better user experience in one fell swoop.

Instead of sticking it out at your current credit union, consider making the switch to an online bank.

Your wallet will thank you.