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How do I deposit cash into an online bank account?

| MoneyRates.com Senior Financial Analyst, CFA
min read

Q: How do I deposit cash into an online bank account?

A: Different online banks have different procedures for handling this. Overall, it is perhaps the one distinct disadvantage of online banking versus traditional, branch-based banking, but it is a disadvantage you might be able to minimize.

Making deposits several ways

For most types of deposits, banks with online savings accounts operate much the same way as traditional banks, and are probably more technologically up-to-date. This means that you can make deposits via wire transfers from other institutions, direct deposits of paychecks, or often via electronic imaging of paper checks.

Cash, however, is more difficult to deposit. Some online banks accept cash deposits via participating ATMs, while others leave you no option but to mail cash in.

Disadvantages to online bank cash deposits

These limitations on cash deposits leave you with certain disadvantages. For one, putting cash in the mail or into an ATM lacks the certainty of handing the money to a bank teller and leaving the bank with a receipt in hand.

For another, mailing in cash will cause a delay in when the deposit is reflected in your account. That delay could be inconvenient if you need to write checks against the deposit, and it also could cost you a few days' worth of interest.

To some extent, these disadvantages could be reduced by special mailing of your deposit, such as registered mail for security or express mail for timing. However, that would cost you every time you wanted to make a deposit.

How to deposit cash into an online bank account

Here are five options for dealing with the problem of depositing cash into an online account:

1. Minimize cash receipts. This may depend on what you do for a living, but if possible, encourage payment via check rather than cash.

2. Choose an online bank that accepts ATM deposits. These are at least a little better than mailed deposits, but not all online banks accept deposits via ATM.

3. Consolidate deposits to make special handling worthwhile. The costs involved in registered or express mail become smaller as a percentage of a large deposit. If you can stay away from several small deposits in favor of the occasional large one, it may be more worthwhile - as long as this doesn't entail the risk of leaving large amounts of cash sitting around.

4. Stick with a traditional branch-based bank. Online banking may not be feasible if you have regular cash income.

5. Split your banking for transactions and interest-earning purposes. In other words, maintain a traditional bank checking account, but accumulate savings in an online savings, money market account or certificate of deposit (CD) to reap the interest rate advantage online banks often offer.

Generally speaking, online banking offers consumers several advantages, including advanced technology, low-cost checking and higher interest on deposits. However, the awkwardness of handling cash is a difficulty if you need to make regular cash deposits. This illustrates that there really isn't one banking solution that is best for all people, but that choosing a bank comes down to matching a bank's features and capabilities with your needs.

Comment: Do you prefer an online or traditional bank for your deposits? Why did you choose your current financial institution? 

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