4 myths about online savings accounts

December 03, 2020

By Pam Leibfried

4 myths about online savings accounts

two women sit on couch while one uses her smartphone

Myth 1: Online accounts aren’t insured like other savings accounts

There is a misconception that savings accounts at online banks and credit unions are not insured like those at traditional brick-and-mortar banks. But that’s generally not the case. Most online banks and credit unions are insured by the FDIC (for banks) or NCUA (for credit unions). There are some smaller fintech apps whose accounts are not insured though, so you should definitely confirm that the institution you’re using is insured. Just look for the FDIC or NCUA logo on the website. It’s generally found at the bottom of the page.

For example, Alliant’s online savings accounts are insured by the NCUA, so if you scroll down to the bottom of this page, you’ll see an NCUA logo stating this: “Your savings federally insured to at least $250,000 and backed by the full faith and credit of the United States Government.”

Myth 2: Online savings accounts are complicated to set up

Opening an online savings account is actually a very simple procedure for most people, especially if you already have another account with that bank or credit union. For example, Alliant members can open up to 19 supplemental savings accounts with just a few clicks. They can just click the link to open a new savings account, give the account a custom name (my next car, my wedding fund, etc.), and transfer money into it and they’re up and running.

It is true, however, that when you set up your first account with any financial institution, you need to provide proof of identity. That’s a requirement of the Patriot Act whether you start your banking relationship online or in person at a branch.

Today’s technology makes providing your identification documents digitally a snap. You can just send a photo or scan of your IDs to the financial institution. Depending on how their systems are set up, that process could be done by secure emails or by uploading via a secure online form. Either way, the process is pretty painless. Plus, by opening online, you’re saving yourself a drive to and from a branch, so you’ll likely spend a lot less time on the application process if you go the online route.

Myth 3: Online banking doesn’t offer customer service

Some people think that online banks must be impersonal and that it is hard to get help from an actual human if you need it when you use an online bank. And while that may be true for some start-up online banks, in general, online banks have robust call centers to help members when they have a question or need to resolve an issue. At Alliant, our largest team is our member care team, who provide one-on-one member service via phone, email and secure messaging within Alliant online banking and our mobile app.

Myth 4: Online savings accounts aren’t as safe as other accounts

It’s true that some people feel leery about making any transactions online. My mom is even afraid to use Amazon! But as long as your accounts are at an online bank or credit union that is insured by the FDIC or NCUA, your savings are protected.

When accessing your online savings, it’s obviously important to be smart and security-savvy –use your phone’s biometrics (fingerprint or face ID) for login, opt into two-factor authentication, never use unsecure or free Wi-Fi networks when you log in to your accounts, etc. Taking these basic, standard cyber security precautions helps to protect you and your accounts.

Pam Leibfried is a member communications specialist whose love of words led to a writing and editing career. After a brief stint teaching English, she transitioned to corporate communications and spent 20 years at The Nielsen Company before joining Alliant’s content development team. Early in her work life, Pam’s friend Matt explained the benefits of a 401(k) and her dad encouraged her to start a Roth IRA. Their good counsel prompted her to prioritize retirement savings, which just might enable her to retire early so she can read more and live out the slogan on her fave T-shirt:  “I have a retirement plan: I plan on quilting.”   

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