The legendary American actor Bob Hope once said, “A bank is a place that will lend you money if you can prove that you don’t need it.” Although he was joking there is a certain truth to the statement. If your credit isn’t up to par, then you’ll have a more difficult time getting a loan and paying it back than someone who has an excellent credit rating. Having no credit is almost as bad as having negative items on your credit report, and sadly teenagers and young adults trying to prove their financial merit are the ones who fall into the category of those who lack a credit history the most.
What is a Credit Score?
A person’s credit score is a numeric value that represents their credit worthiness. Credit bureaus submit information to a credit report, which is the basis for the credit score. Banks and credit card companies use this score to gauge the likelihood that a person will pay back money borrowed via a loan or items that are purchased using a credit card. They also use the score to see which customers will generate the most revenue for the bank. Cellphone companies and other utilities, rental agencies, insurance companies, and some government departments use the same process to decide a person’s credit worthiness.
Perks and Features
Unlike online banking, a PayPal account is free for anyone to open and has no effect on a credit score. While PayPal does offer a credit card that features perks such as no annual fee, Platinum benefits, and earning bonus points that account holders can trade for gift cards or travel deals, other online banking services offer additional services like syncing banking and brokerage accounts, quicker transactions, and lower interest rates on loans than a brick and mortar institution. This is because banks that are strictly online don’t require the overhead costs or staff necessary to operate a physical location.
Checks and Debit Cards
One perk of using a bank instead of limiting your funds to a PayPal account is that banks offer checking accounts to their customers. If you anticipate using an internet-only bank then you have the benefit of ordering checks online from whichever company that suits your needs. You can save money and help the environment when you use an online bank account because it eliminates the need for paper documents, thus reducing the carbon footprint. However, in using an internet-only bank you give up some benefits of using an account at a physical location. Here are a few that come to mind:
- Surcharge-free AMT Use – Online-only banks rarely have their own ATM machines and when they do, the machines are not usually in a convenient location. Using a different machine could cost as much as $3 or more per transaction.
- FDIC – This stands for Federal Deposit Insurance Corporation, the government organization that serves as the underwriter for most private bank deposits. This means that a bank that is FDIC-insured can guarantee an amount of one-quarter of a million dollars for each depositor at every insured bank in the country. If you keep your finances in an online banking institution that isn’t FDIC-insured, then there’s no guarantee that your funds are safe should the bank go belly-up.
- Customer Service – Brick and mortar banks usually have a low turnaround in staff positions, and many employees who start out at the customer service window work their way into higher office positions within the bank. When you bank at a physical location, the employees make it a point to recognize you, especially if you go into the bank on a regular basis. With online banks, there’s no guarantee that you’ll get a real person on the phone, much less good customer service.
- Technical Difficulties – When the website goes down for an online-only bank, there’s no local branch to help complete transactions. Because everyone else also wants to know what’s going on and when the site will come back up, long wait times are almost guaranteed with calling the bank to ask questions.
That being said, some online bank accounts are worth the effort, an online-only bank account that is FDIC-insured is a great way to save money. Because they can be used for anywhere, online financial services, such as an online bank account or PayPal, are especially beneficial to teenagers and young adults. The PayPal debit card works similar to a prepaid credit card, offering a cash back bonus on certain types of purchases. This makes it a great option for students who travel back and forth, splitting their time between their parents’ home and a university or other facility for higher learning.
Ashley Munroe, late twenties, freelance writer, yoga, natural foods, hiking, camping, loves the outdoors, married, and two young daughters. thankful to his parents for giving her a good financial foundation, good credit rating, new car thanks to it, saving for retirement even at a young age. She is really enjoying using her own experience to write articles for www.personalchecksplus.com.