It may not seem like it, but online banks have been around for over 20 years. The first genuinely full-service online-only bank was Security First Network Bank, which opened its website in 1995.
Since then virtual banks have flourished. In terms of the online banking experience, large, conventional banks are still playing catch up with virtual banks, which have focused on making sure their online user experience is intuitive, fast, and secure.
Is a virtual bank right for you? The answer is more nuanced than you might think.
Higher Returns / Lower Fees
Because virtual banks don't have to bear the costs of physical brick and mortar branches they can charge far lower fees than standard banks and can offer significantly higher interest rates. Both of these are incredibly enticing to customers that feel their bank is gouging them with fees and pay little or no interest.
While these are great reasons to leap into online virtual banking, it's essential to make the transition properly; otherwise, the disadvantages to online banking can make your life more difficult.
Don't Abandon Standard Banks Until Your Ready
This is the single best piece of advice you can get when transitioning into virtual banking. You should have your primary relationship with an online bank and maintain a checking or savings account with a traditional bank.
Online only banks make it very difficult to deposit cash. They have no branches to accept your deposit. Instead, you're generally required to either find a bank machine that accepts cash deposits or deposit your cash into a standard bank and then transfer the money into your online account. As the latter is the easiest way to get cash into your online account, it behooves you not to close your checking account until you are comfortable that the loss of having access to branches won’t affect your quality of life.
About: Rory Brown is currently working on a new app that will help consumers navigate online banking. The app will connect clients to the best online offerings and provide comparisons on rates for home loans, auto loans, and more.
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