A millennial’s guide to digital banking

The traditional banking process involves entering a branch to conduct business, regular visits to ATMs and dealing with checks and cash. Digital banking eliminates that need. Almost all brick-and-mortar financial institutions have digital options and some don’t have a consumer-facing physical presence at all. 

David Reiling, CEO of Sunrise Banks, a leader in financial technology, stresses the need for digital banking.

“Meeting people where they are is important,” says Reiling. “Mobile devices allow us to connect with people instantaneously and consumers expect the same from their banks. Speed, convenience and environmental sustainability are all reasons to bank in the digital landscape.” 

It pays to know more about what’s available to you in the world of digital banking. Here’s your guide. 

Digital checking accounts

Even if you will never write a paper check (and odds are you won’t), you’ll want a place to deposit and house the money you earn or receive. With a checking account you can tap into those funds to pay for the products and services you need. 

What to look for in a digital checking account:

  • No or low fees. Conventional banks often charge account management fees or penalize you for dipping below a certain balance. Checking accounts from online banks typically have lower, if any, associated fees. 
  • Rewards. Some financial institutions offer checking accounts with rewards programs. Look for one that will give you a cash bonus if you enroll in direct deposit (so paychecks will be deposited electronically) and the ability to build points or earn cash. 
  • Mobile app. You should be able to snap a pic of paper checks so you can deposit them electronically and manage your account on the go. 
  • Easy bill-pay. Either via the app or website, you need the ability to send bill payments electronically.
  • ATM access. Although people are moving away from cash transactions, it’s still legal tender and you’ll want the ability to have some on hand. For large denominations you’ll need an ATM, so make sure they’re available and that you won’t be charged extra fees. 
  • Access 24-7 support. You should be able to resolve any issues with an online chat feature as well as by phone. 

Digital savings accounts

The perfect addition to a checking account is a savings account. With it you’ll be able to set cash aside for emergencies and fund goals.

What to look for in a digital savings account:

  • No or low fees. As with a checking account, you’ll want there to be few costs associated with a savings account. 
  • At least 2% interest. This is where a lot of online financial institutions shine! Many are offering interest rates far higher than their conventional cousins. If you’ve scraped together $5,000 and kept it in a savings account offering 2.25% interest, you’d earn $229 in two years. You’d be lucky to earn enough for a vegan hotdog with a conventional savings account that offers a common .08%.
  • Compatibility with your checking account. Transferring funds should be simple. Just move the money over with the app or online, or set up an automatic transfer so a fixed amount is sent over every month or pay period.

Credit cards and loans

You can apply for and receive just about any kind of credit product from a lender with an online presence. After you complete the application available on the website, in minutes (if that) you’ll find out if you qualified and were accepted. 

What to look for in a digital credit product:

  • The lowest interest rate possible. The lower the rate, the less you’ll pay in financing fees. Scan lenders’ websites to identify the best rate you can get. 
  • Easy online account management. You should be able to see your activity online and check it often for accuracy. 
  • An excellent app. Download the app to your mobile device to always know your balance. If it’s a credit card, you will be able to stop charging when you hit your personal limit.
  • Text and email activity alerts. Some credit issuers will send you an electronic alert every time a transaction is made. It will help you track spending, but also provide a warning if somebody else is using your account.

Merchant transactions

Currently there are several ways to pay that don’t involve removing bills from a wallet:

  • Online. E-commerce is the way most people shop. It’s all done with you entering a debit or credit card number into the website and hitting the “pay” button. 
  • Point-of-sale systems. As long as sellers have card readers (such as Square and PayPal Here) attached to their mobile devices, you can pay with your debit or credit card.
  • Mobile wallet. By uploading your credit and checking account to your mobile device, you can use them to make contactless payments.
  • Automatic payments. You can authorize a retailer (like Amazon Go) to automatically charge you for a purchase. Select what you want, walk out the door, and the transaction is complete. 

Technology is marching forward with new digital payment options on the horizon, but whatever they may be, exercise caution. Frictionless transactions can feel like you’re not using real money. You are. If you don’t monitor your accounts, you’ll soon delete your funds or rack up unintended debt.

Person-to-person payment apps

If you go out for a coffee with a friend and if she picks up the tab, you can repay her by sending your portion of the bill with a person-to-person payment app. It may come with your banking account — such as Zelle — or from you using an independent company, including Venmo and PayPal. 

According to Melissa Lowry, Vice President of Brand and Consumer Marketing for Zelle, the appeal of these apps are their convenience and instant gratification. “Just pull out your phone and pay your friends,” says Lowry. “It’s satisfying, and eliminates the awkwardness of talking about money owed. With these digital transactions you do it all in the moment.”

What to look for in a person-to-person payment app:

  • Trust. Only do business with a highly rated company. 
  • Turnaround time. Apps that come with your bank tend to offer the fastest service. With no additional app to download, the money will appear in (or disappear from) your account in minutes. With others there can be a delay of a few hours or even days.
  • Low or no fees. Some apps charge for the transaction while others don’t. If you want to keep costs down (and why wouldn’t you?) go for the least expensive option.

After that it’s up to you to use the app safely. Only pay people you know and trust and double check any contact information you enter, says Lowry. Once the money leaves your account, it’s virtually impossible to get back.

In a nutshell

Ready to go totally digital? You can. However, you may miss out on the face-to-face interactions that can improve service. “Consumers might be able to glean more information from their banker than from their banking app,” says Reiling. Don’t be afraid to pick up the phone or schedule an appointment with an actual human.

Erica Sandberg

San Francisco-based consumer finance journalist whose work appears in a wide variety of top-tier outlets.

Erica’s the resident money and credit authority for KRON-4 News and author of “Expecting Money: The Essential Financial Plan for New and Growing Families.” Erica is an amateur hockey player and ballet dancer and has the broken bones to prove it.