Are Online Banks Okay?

Raphael asks what Dave thinks about using an online-only bank for his emergency fund. Is it a bad idea?

QUESTION: Raphael asks what Dave thinks about using an online-only bank for his emergency fund. Is it a bad idea?

ANSWER: No, it’s not a bad idea if it is something where you can check out its reputation. There are household names that are online banks. I’d want to be very, very sure that this was a reputable thing because there are a lot of scams and things online and you want to really know what you’re getting into because you’ve got nowhere to go to knock on the door to try to get your money. You are stuck.

There are lots of brands that you and I recognize that do online banking. There’s nothing wrong with that at all as long as they’re reputable and standup folks. You can’t be guaranteed of that online, but you can’t be guaranteed of that of a brick-and-mortar bank either.