Lots Internet-only banks are popping up. You may wonder if they're a good thing or not. They have both advantages and disadvantages over traditional banks.
One advantage is the cost of operating an internet-only bank is extremely low compared to a traditional bank. There are no bank branches or tellers so they can pass the savings on to you.
Most offer low-fee or no-fee products like checking accounts but sometimes require at least one direct deposit per month. The amount of interest paid also varies from bank to bank. Some pay nothing while others pay amounts comparable to regular banks. There are plenty to choose from so check around until you find one that has what you’re looking for.
Also, most of these banks offer online banking options that are as good, if not better than traditional banks. Most have 24-hour access. Many will offer on-line bill pay free of charge and often allow you to see more details about your transactions. These transactions are often available for viewing faster than with traditional banks as well.
You can also easily transfer funds between your accounts and many will allow you to import your banking information directly into your personal finance software program. This saves a lot of time and potential keystroke errors when reconciling your bank statement each month.
One disadvantage they have is since they have no physical branch locations, you either need to have direct deposit or mail in your deposits. If your employer doesn’t offer direct deposit, it will be more difficult for you to use this type of bank.
You also cannot easily build relationships with these types of banks because you never meet the bankers face-to-face. Even though all banks have rules, bankers are still people. If you have a relationship with your banker it can go a long way when applying for a loan. Most bankers will work harder for a friend than for someone they don’t know.
Another down-side is since they have no branches, you will be charged fees for ATM usage. Traditional banks sometimes allow free ATM usage at their branches for their customers. However, this can be avoided by using a debit card to get cash back after using it to make a purchase at a retail location.
You will have to weigh the pros and cons and decide if you would like to try this type of bank. As with any bank or credit union you are thinking of dealing with, always verify they are legitimate before depositing your money. Refer to the section in “Banking Information” to see how you can check on this.To Internet-Only Banks to Banking Information