Is On-line Banks Safe?
 

Interest rates are rising, and on-line banks seems to be a place to park
your cash, do you feel safe using them?

Cheers!

Online banks are safe as long as they are FDIC insured, and you can actually verify that they are, and that you are actually doing business with the bank that they say they are.

I only use banks for my checking account, and never as a way to earn interest. I think you are better off buying shares in a short term bond index mutual fund. The Vanguard Short Term Bond Index fund is currently paying 2.85 percent, and is low risk and liquid.

Yields are moving in a good way. Short term bond funds like The Vanguard Short Term Bond index (symbol BSV) … have also lost money in the last 3 months as interest rates have moved up. (The price has moved from 79.71 to 77.04 for a loss of $2.67 .. or a loss of 3.3%). Short term bond funds are not immune to rapidly rising rates …

I like short term US treasuries now.
Today you can buy:
6 month treasury with a yield of 1.51%
9 month treasury with a yield of 1.88%
12 month treasury with a yield of 2.18%

You are guaranteed not to lose money on these as long as you hold them until maturity.

I purchase online at Fidelity. But there are many other places to purchase these.

If you buy a 12 month treasury at 2.18 percent and hold it for 12 months, technically you will not lose money. But, if the interest rate doubles 3 months after you buy it, you are losing the opportunity to replace the bond at a higher rate. It's semantics. I prefer to invest in bonds with mutual funds rather than buying individual bonds. I like the liquidity.

We have to deal with what is, not what should be. History, the ten year treasury would pay the rate of inflation plus 2%. Retirees would build a bond ladder so as to have bonds mature on a regular basis and you would buy more bonds at the new rate. You would not make money but you would make enough to preserve your capital plus pay the taxes on the dividends. They are and still are subject to Federal tax but not state and local.

TODAY-The CPI is roughly 8%. The ten year treasury is paying roughly 3% and we pay federal tax on that. Used to be reality 8+2=10%

I've not bought treasuries in a very long time. Banks, brokerages as much as they LOVE US, they have to pay their rent and staff so they need to make money. It used to be that it was easy to open an account with the Treasury and get a higher effective yield as you are paying fees to a bank or brokerage. I expect that is still so.

Use 2 factor authentication and normal precautions. I don’t have a brick and mortar bank anymore. Don’t miss it. If you use a broker they should have online banking

Bond funds verses buying bonds.
The hidden secret. Bonds are sold on a sliding scale commission. Not everyone pays the same price for a resale on a bond. If, you pay more, obviously your percentage yield is less on the same bond. If, you buy a bond and then sell it, you buy retail but sell wholesale.
A bond fund. The same as buying a bond. If, yields go up the value of bonds you hold go down so it same as a single bond can be worth less than you paid for your share.
The loss in a bond fund can be magnified because depending on the fund, they do not only buy investment grade bonds-more risk for higher returns. Also, they leverage bonds. Borrow money on bonds they hold to buy more bonds-more risk for higher returns.

yes, online banks are safe.

Remember the bank can be hacked even if you do not have your individual account online. Thus the only additional risk I see is if you do not protect your login id and password or you do not use a strong password.
Of course you want the bank to be Insured by the Fed. I think they are safe.

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Maybe. Call me skeptical, but I still feel more comfortable doing business with a bank that has real humans working in a real building. And, I would always verify that any bank I use is FDIC insured. You can do this on the FDIC website. Just because they have an FDIC sign on the door, or on their website, doesn't make it true.

What if the website is fake and posing as a real FDIC online bank? How do you know?

Fidelity, Schwab etc. you can go to LSL office if you have an issue. No need to make this complicated

That makes two of us skeptical, one reason I ask here.

Another question: Is there any on-line banks that do have a brick and mortar branch somewhere here in Florida?

I don't understand your question. I think all banks are online. Typically, an online bank is one that does not have any brick and mortar buildings. I use Truist, but I do almost all transactions with them online.