Virtual banks vs Brick-to-click banks
Virtual banks
If you don't mind foregoing the teller window, lobby cookie and kindly bank president, a "virtual" or e-bank, such as Virtual Bank or Giant Bank, may save you very real money. Virtual banks are banks without bricks; from the customer's perspective, they exist entirely on the Internet, where they offer pretty much the same range of services and adhere to the same federal regulations as your corner bank.
Virtual banks pass the money they save on overhead like buildings and tellers along to you in the form of higher yields, lower fees and more generous account thresholds.
The major disadvantage of virtual banks revolves around ATMs. Because they have no ATM machines, virtual banks typically charge the same surcharge that your brick-and-mortar bank would if you used another bank's automated teller. Likewise, many virtual banks won't accept deposits via ATM; you'll have to either deposit the check by mail or transfer money from another account.
Brick-to-click banks
Today, most large national banks, many regional banks and even smaller banks and credit unions offer some form of online banking, variously known as PC banking, home banking, electronic banking or Internet banking. Those that do are sometimes referred to as "brick-to-click" banks, both to distinguish them from brick-and-mortar banks that have yet to offer online banking, as well as from online or "virtual" banks that have no physical branches or tellers whatsoever.
The challenge for the banking industry has been to design this new service channel in such a way that its customers will readily learn to use and trust it. After all, banks have spent generations earning our trust; they aren't about to risk that on a Web site that is frustrating, confusing or less than secure.
Most of the large banks now offer fully secure, fully functional online banking for free or for a small fee. Some smaller banks offer limited access or functionality; for instance, you may be able to view your account balance and history but not initiate transactions online. As more banks succeed online and more customers use their sites, fully functional online banking likely will become as commonplace as automated teller machines.
Brick And Mortar banks
A traditional "street-side" business that deals with its customers face to face in an office or store that the business owns or rents. The local grocery store and the corner bank are examples of "brick and mortar" companies. Brick and mortar businesses can find it difficult to compete with web-based businesses because the latter usually have lower operating costs and greater flexibility.
When the government passed legislation opening up hundreds of billions of dollars for stimulus spending two years ago, it's not as if that enormous sum of cash suddenly appeared in a vault somewhere.
Sure, the government had a fair share of cash-on-hand, billions worth, but the overwhelming majority of that money was, for lack of a better word, imaginary.
It existed not in physical space, but in calculable, kept-track of data through a series of electronic transfers and transactions.
To this day, as the stimulus spending dries up, very little cold hard cash was ever dispersed.
Physical currency has always been a means to an end. In the age of the Internet, the need to carry actual sums is no longer necessary. Therefore, what's the point of a brick and mortar bank? Is there a reason we need to burden city blocks with insurance nightmares, and make banking customers pay for services they rarely use anymore?
Sure there's the worry that some evil villain is going to discharge an EMP over New York City, wiping out every financial record in existence, but let's get real here. The true natural value of paper currency existing in a vault is no different than it existing as a series of ones and zeroes. Both, in the event of a true crisis, would be equally worthless.
So, the shift to strictly online banking makes sense on a logical level, but what about on an economic and personal level? To decide that, consider the following:
-Online banks have higher interest rates: They can because they have much less overhead to worry about than banking institutions with real world locations. It's also an incentive they use to drive business their way. Why not offer higher interest? So why not take advantage of it?
-Online checking accounts are easy and safe: The actual check - when was the last time you saw one or used one? Your 15th birthday and your college apartment rent, are probably your answers. The account itself existing online is much more important for automatic withdrawals and other things you'll use it for. Plus, without the paper trail of an actual check, identity theft is significantly reduced.
-ATM access is ample: Despite what you might think, online banks and credit unions have a vast network of ATMs that oftentimes have no surcharges for cross-banking withdrawals. You see, that surcharge you pay with normal banks is nonsense, because it costs them nothing to have a robot reroute your funds through another bank. It's a slick way of paying for all that overhead. Online banks don't need to do that, and see the freedom and prevalence of their ATMs as a way to attract customers.
-Credit unions are cooler: Without all the added riffraff of investment accounts and other big boy nonsense, low-key online credit unions focus entirely on simple daily bankers like yourself. This means their services are catered to you and you alone.
-Nobody respects the “too big to fail” banks anymore: This includes you, and you know it. They're the clowns that got us into the economic train wreck we find ourselves in today, and are the main bums responsible for why we're having such a hard time clawing our way out. Forget about it. Deposit your money with smaller streamlined online banking organizations that aren't responsible for the Great Recession.
Money is imaginary. Whether it's cash or code, it's just a method of simplifying valuation of goods and services. So skip the brick and mortar bank for a banking website; there's seriously no difference except in savings and superior service.
Like brick-and-mortar banks, most online banks are also covered by FDIC insurance, so customers don’t have to worry about losing their money if an online institution fails.
Using online banks can expose you to some higher than normal fees, however. Because most online banks do not maintain their own network of ATMs, you may have to pay ATM use fees when using cash machines to make withdrawals. Some banks like ING will waive these fees on their side, but you will probably still have to pay ATM operator’s fees.
Another potential drawback to using online banks is the slowness of money transfers and deposits. Check deposits must be mailed to the bank, and it can take several days before those funds are accessible. While transferring money between different accounts at the same online bank is instant (like between savings and checking), transferring funds between an online bank and a traditional bank can take several business days. On the plus side, this can restrict mindless spending, but it can prove problematic if you need your money right away.
One of the main advantages to using a traditional banking account is the quick and easy accessibility of your money. Traditional banks typically have a network of fee-free ATMs in your area and you can get face-to-face customer service from bank tellers when needed. Customer service is also available by phone from most online banks, however.
Making non-electronic deposits is often easier at a brick-and-mortar bank. Traditional banks accept all kinds of deposits including cash, paper checks, wire transfers and electronic deposits. While most online banks will accept paper check deposits, they take longer to deposit because they have to go through the mail. To deposit cash, you have to do a wire transfer.
For those who are used to working online, online banking is an appealing option. Most large traditional banks also offer online banking features, however. Checking balances, bill paying and transferring funds between accounts is just as easy with these online features as it is with online-only banks.
To get the best of both worlds, consider opening accounts with both an online bank and a brick-and-mortar bank. Linking your online account to a traditional bank is typically free and easy. Stash savings in the online account to enjoy higher interest, but keep some cash in the traditional account for every day expenses and easy access.
