Are "online only" bank deposits "safe"?

[Safire]

So, 2023 is going to be a very big year for us and we need to be cash rich (even if other asset poor) for a few particular reasons. Last year, seeing how little Wells Fargo was paying me in interest, I moved the vast majority of my cash to two different online banks. I'm now concerned about the state of one of these banks given that 3 banks have failed in 4 days (2 shut down, 1 voluntarily shuttering).

Should I move money back into Wells Fargo? I understand that no bank is truly 100% risk free, but given this is all we have as "cash" (even if under FDIC limits), I do worry in particular about these "online banks".

Please advice. Thank you.

 

[jim584672]

You verified they are FDIC and are under the limit, then I wouldn't worry about it.

 

[pb4uski]

+1

 

[retire48in2018]

FDIC as last 2 posters indicated is key

Diversity in more than 1 institution is probably good for online banks. Risk related to internet, servers, random ware, etc could be mitigated by more than 1

We had issue with a local B&M bank - that had some issue that shut down everything for a couple days. Never explained what it was. City had issue as well that was outed by newspaper as ransom ware attack. I had $ at different places, so no biggie.

 

[Spock]

Depends on which banks and how long you can wait for your funds. Some of the charts posted as part of the SVB collapse shows Ally is 4x worse in some of the asset categories. While deposits there are FDIC insured, I'd move $ that are needed very short term as I can't wait for an FDIC resolution. (they will have all of my possessions on their truck and won't unload unless they are paid). So it depends on how quick you need access and if you can wait for the FDIC to sort things out if your online banks go offline.

 

[Aerides]

Unless you have cash over $250k in a non-FDIC insured bank, you have nothing to worry about.
Moving your cash now would be adding to the overall problem, the stampede away from small/online will be exacerbated by folks moving for no benefit, and send larger ripples throughout the economy. Consumer confidence is key to everything.

Of course, if you wanted to keep 90-days of expenses in a super-low-risk big bank and earn almost nothing, that might give you more peace of mind.

 

[Sunset]

OP - I'm surprised you were at Wells Fargo, and consider going back to them.
I feel from your posts that you are VERY concerned about getting ripped off, etc. Wells Fargo is famous for that and got in trouble for doing it.

I would trust Chase a lot more that Wells Fargo, and I've avoided Wells Fargo due to their past practices.

We have money at ALLY , it's one of the banks under pressure, but our money is below the $250K FDIC limit so no worries.

 

[copyright1997reloaded]

Depends on which banks and how long you can wait for your funds. Some of the charts posted as part of the SVB collapse shows Ally is 4x worse in some of the asset categories. While deposits there are FDIC insured, I'd move $ that are needed very short term as I can't wait for an FDIC resolution. (they will have all of my possessions on their truck and won't unload unless they are paid). So it depends on how quick you need access and if you can wait for the FDIC to sort things out if your online banks go offline.

And Ally shares some of your concern, thus:

Ally Hikes No Penalty CD To Rate-Leading Status Amid U.S. Banking Crisis

https://www.depositaccounts.com/banks/ally-bank/offers/

 

[brucethebroker]

OP - I'm surprised you were at Wells Fargo, and consider going back to them.
I feel from your posts that you are VERY concerned about getting ripped off, etc. Wells Fargo is famous for that and got in trouble for doing it.

I would trust Chase a lot more that Wells Fargo, and I've avoided Wells Fargo due to their past practices.

We have money at ALLY , it's one of the banks under pressure, but our money is below the $250K FDIC limit so no worries.

+1, Wells Fargo.
Our family had a very negative dealing with WF awhile back. We vowed then to NEVER deal with them again. There are many other "to big to fail" banks out there to choose from.

 

[Safire]

OP - I'm surprised you were at Wells Fargo, and consider going back to them.
I feel from your posts that you are VERY concerned about getting ripped off, etc. Wells Fargo is famous for that and got in trouble for doing it.

I would trust Chase a lot more that Wells Fargo, and I've avoided Wells Fargo due to their past practices.

We have money at ALLY , it's one of the banks under pressure, but our money is below the $250K FDIC limit so no worries.

While I am concerned about getting ripped off, that is because my history with finances has been "checkered" to say the least. I was naive... nay, I was an IDIOT and I was so badly burned with scams not once or twice but FOUR times that I've turned paranoid. I can forgive myself for my past mistakes, but I am determined to never put myself or my innocent family through that again. EVER.

I get anxiety reading about 3 banks going down in 4 days. I have my main a/c with Wells Fargo and a much smaller one with Chase, but I moved most of my funds (needed later this year) into this online bank (FDIC insured and NOT Ally) because I love their interest rates and another also online bank (also FDIC insured and NOT Ally) due to "sentiment" (long and irrelavant story there). However, I am no longer so comfortable because as I said, I have been burned multiple times before. I am not calling this bank a scam or that they'll rip me off or anything, I just prefer getting NO interest so long as my principle (which we will need soon - in a matter of months) is safe. Maybe I'll move it to Chase, instead.

+1, Wells Fargo.
Our family had a very negative dealing with WF awhile back. We vowed then to NEVER deal with them again. There are many other "to big to fail" banks out there to choose from.

Which ones? Looking for recommendations! Thanks.

 

[threeonesix]

Discover Bank online only offers 3.50% APY. Vanguard Cash Account Plus online only (currently invitation only but should open to all soon) offers 4.1% APY. Cash access easier with Discover. Both FDIC insured up to the standard $250k. If I had to choose, I trust Vanguard more. But with that account there is no debit card, checks or quick (today) access to cash; rather, you must have another bank to where you can transfer cash and then have access to it the next day. For a thorough list of online-only banks and their deposit rates check Nerd Wallet @ https://www.nerdwallet.com/best/banking/best-online-banks.

 

[harley]

I've had accounts at Ally, Chase, and Discover for years and years. Nothing but positive experiences to report. I'm aware of Ally's potential problems that are being talked about now, but I've made sure to stay under the FDIC limits, so I'm not particularly worried about that. Personally, I've had many more issues (mostly customer service) with the Big Banks (BoA, Citi, WF) over the years, and try to avoid them like the plague. If I ever decided to go back to a B&M bank, I'd probably choose a credit union.

 

[Koolau]

Trust, but verify.

Lots of research.

 

[Turbo29]

I had accounts with Washington Mutual when it collapsed in 2008. As far as accessing my money via ATM or ACH (in or out) there was no wait for any type of FDIC resolution. The transfer of everything to Chase was seamless.

I still have a bunch of Washington Mutual Checks, which I still use on the rare occasion that I need a check; Chase didn't even change the routing numbers.

 

[mebden]

+1, Wells Fargo.
Our family had a very negative dealing with WF awhile back. We vowed then to NEVER deal with them again. There are many other "to big to fail" banks out there to choose from.

I use wells fargo for 1 thing and thats credit card just for the points I get from them. And if looking for a good online bank that is FDIC insured check out Bask Bank right now paying out a whopping 4.26% and I've been with them for a year and very quick on transfers

 

[O2Bfree]

I got an email today from Wealthfront that assures members that they have no deposits with Silicon Valley Bank or Signature Bank. They also provided a link to a list of the banks they do business with. Wealthfront spreads each member's deposits out over up to eight different banks so you have up to $2M FDIC insurance. They're currently paying 4.05% APY.

 

[Sunset]

I had accounts with Washington Mutual when it collapsed in 2008. As far as accessing my money via ATM or ACH (in or out) there was no wait for any type of FDIC resolution. The transfer of everything to Chase was seamless.

...

Washington Mutual was the 2nd bank I was at that failed. Both times it was quick to my money, even included interest !

I always found it a weird bank, with circular stands around instead of a counter.

 

[swakyaby]

I find online banks very safe, as long as your deposits are kept within the FDIC limits. Over the years, I’ve kept online savings accounts at Discover Bank, Ally, Capital One, and CIBC. I’ve recently closed all of them because their interest rates were no longer competitive with what many money markets are offering today. I found Ally took the longest to transfer funds by ACH to my linked bank account—8 days.

 

[Another Reader]

I had accounts with Washington Mutual when it collapsed in 2008. As far as accessing my money via ATM or ACH (in or out) there was no wait for any type of FDIC resolution. The transfer of everything to Chase was seamless.

I still have a bunch of Washington Mutual Checks, which I still use on the rare occasion that I need a check; Chase didn't even change the routing numbers.

I had a mortgage with them and it was equally seamless. The letterhead on the bill changed to Chase.

 

[harley]

I find online banks very safe, as long as your deposits are kept within the FDIC limits. Over the years, I’ve kept online savings accounts at Discover Bank, Ally, Capital One, and CIBC. I’ve recently closed all of them because their interest rates were no longer competitive with what many money markets are offering today. I found Ally took the longest to transfer funds by ACH to my linked bank account—8 days.

I just transferred some funds from Ally to Synovus to get my account under the FDIC limits. It took less than 48 hours.

 

[Dtail]

I just transferred some funds from Ally to Synovus to get my account under the FDIC limits. It took less than 48 hours.

My Ally transfers to BOA is 1 business day.

 

[GalaxyBoy]

I, too, just completed transferring my cash out of Ally to Schwab, where I purchased their money fund to get a better rate. I routinely transferred between Ally and Schwab and it always takes one business day. Ally's help section says transfers take 3 business days except transfers "eligible for expedited delivery between Ally Bank and accounts you have at other institutions" usually take 1 business day. I guess Schwab is an eligible institution.

 

[audreyh1]

My Ally transfers to BOA is 1 business day.

My experience as well.

 

[Surewhitey]

I finally shut down a couple of small bank accounts (lingering ones) and opened up the Fidelity cash account for purchasing CD's and found the ease of use for everything from remote deposit to debit card management to cash equivalent investments.

I still have a local bank account for little things, but I could see getting rid of it too.

I'd never go with the mega banks... Just don't like them for some reason. Although etrade is now part of a mega... And DW opened a Marcus. I just want to clean up the mess now.

I never go above the $500k limits on any bank / brokerage, except for maybe Vanguard

 

[freedomatlast]

I moved every cent I had with Ally, out of there last summer, and it was a significant amount of money. Their internal communications are horrible and it's almost impossible to get to talk with anybody directly who has the authority to solve issues. Finally had to get the Office of Comptoller of Currency involved to get it sorted out. That was fun. After my experience with Ally last year, I wasn't surprised at all hearing of the looming bankruptcy risk. At the time, it seemed like circus monkeys could do a better job of running a financial institution.

I never had any money with WF and that's the last place (after Ally) I'd go with any new funds, based on the tons of negative publicity they've had over the last several years. Plenty of posters here also have WF horror stories.