Are Online Banks Trust worthy

Online banks are financial firms that provide banking services mainly or totally through the Internet. Their services range from account opening to bill payments and CD investments. 

Online banks operate 24/7 and offer lower fees, fewer time limits, higher savings and CD rates, and cashback rewards.

The main drawback of Online banks is their exclusive virtual operation: Customers will be unable to deposit or withdraw cash due to this. Some online banks offer ATM services, like Capital One 360, blending physical and virtual operations, widely recognised as online. However, these developments still do not entirely remove the doubt many still have about online banks. 

In this blog post, you will get a very definite understanding of how online banks handle security and if you can trust an online bank to keep your earnings.

FDIC’s role in bank security

In 1933, Congress inaugurated the Federal Deposit Insurance Corporation (FDIC) to keep the country’s banking system stable and the public’s trust in it. This was an urgent and highly needed move because, in the 1920s, spanning into the early 30s, a national bank failure resulted in a severe loss of many American savings. 

The FDIC has been saddled with the responsibility of Insuring financial institutions, bringing accountability, and increasing customer protection. Part of the duties is to make significant economic issues easily resolvable. Since its inception, the FDIC has proven its capacity over the years by changing the US banking security trajectory. 

Aside from federal government funding, the FDIC collects premiums from its members to cover expenses and compensate depositors at failing banks. The bank deposits the money into a Deposit Insurance Fund (DIF), with banks paying based on insured deposit balances and risk levels.

Related blog post: What are online banks? Features, Drawbacks & Reputable Banks.