How to open an account online?

What is an online bank account? Definition

An online bank account is an account that you open online on the bank’s website or app using your mobile phone or computer. This bank you are wanting to bank with may or may not have a physical office address.

The online account usually comes with a limit, i.e., spending and balance limit, which may not be suitable if you want your account to hold a large amount of money or do certain transactions. These accounts are suitable as savings accounts because they often offer higher AER rates than the traditional accounts. 

There is also the possibility of obtaining overdrafts against the next account funding, making them suitable for salary earners who may need to obtain overdrafts against their monthly salary.

The online bank account operates in such a way that you do not need to visit the physical bank building to carry out any transaction such as money transfer, bill payments, cheque deposits, checking account balance, etc. All are done electronically via the bank’s website or app using a mobile phone or computer. These online banks also issue debit or credit cards to be used for payments for goods and services and on ATMs to withdraw cash.

While some online banks have ATMs where cash can be withdrawn, others provide ATM out-of-service refunds for their customers when they use other banks’ ATMs. They also provide 24/7 customer support especially when they do not have the luxury of a physical banking building where complaints can be lodged.

So, how do you open an online bank account?

Check out the steps below…

• Choose the type of account you want to open – There are four types of online accounts that you can open – savings, money market, credit, and certificate of deposit accounts. You need to know what services are offered for these different types of accounts so you can decide which best suits your banking need.

For example, if the account is meant primarily for savings and not constant transactions and withdrawals, then you should open a savings account; otherwise, a credit account will suffice. 

Also, identify whether you want a single or joint account. For the single account, you are the sole signatory to the account while the joint account will be opened by more than one person.

• Identify the bank of your choice – often, it is best to go for banks with physical banking buildings as insurance for when you want to lodge a complaint. Otherwise, make sure the bank has a great customer support system and good reviews online. Also, ensure that the bank is FSCS or FCA insured so that your money of up to £85,000 is insured in case of bankruptcy.
   
• Once you’ve identified the bank of your choice, visit their website or use their app to apply by filling out the required form(s) for the type of account you want. 
   
• Provide the necessary information or details about you such as name, age, nationality, and other supporting documents. Some of the supporting documents required are – any one of National Insurance number, National ID card, or International Passport, and one proof of residential address. The proof of residential address may be a recentutility bill, credit card or bank statement, mortgage or tenancy agreement, a current tax bill, or a letter of admission for international students studying in the UK.
   
• Submit your application.
   
• Once you have been issued a new account number, go ahead and fund the account. You may need to provide debit or credit card information beforehand while filling out the application for this purpose. Otherwise, you can transfer the money by yourself after you have gotten the new account number. It will normally take a few days for the account to be fully functional, after which you can begin to use it for your transactions.

Advantages of online bank accounts

• Ease of opening and use – you are saved the hassle of driving all the way to the bank simply to open an account when you can do it from the comfort of your house and for free.
   
• Higher AER rates – since the bank may not have physical buildings to maintain, there is a possibility of them offering a higher interest or AER rate than that of traditional banks.
   
• Out-of-service ATM charges refund – online banks usually pay refunds for having to use ATMs especially those that do not have ATM facilities of their own.
   
• Account monitoring and access 24/7 – it is easy to monitor how money moves in and out of your account any time, any day.
   
• Access to overdraft when you have reached the account limit – provision of overdraft facilities makes it especially useful for salary earners in case you have spent above your limit for the month.
   
• Add-ons and rewards – different banks offer add-ons and rewards to be used with certain merchants for using their online services per day or refering someone. These differ from bank to bank.

Disadvantages of online banks

• Low account and spending limits – not exactly suitable for some kinds of transactions. So it is important to know what your banking needs are before opting to open an online bank account.
   
• No physical building to walk in and make in-person complaints – if you happen to choose an online bank with poor customer support facility, making complaints for poor services becomes a problem.