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Rory Brown, Managing Partner of Nicklaus Brown & Co., on the Pros and Cons of Switching to a Virtual Bank

Originally published on

Online-only banking, or virtual banking, has revolutionized the industry, making it far more powerful and accessible than at any point in history. In many cases, people can do all of their banking, and pay all of their bills without ever needing to leave the house. Plus it offers people much higher interest on their deposits and far fewer fees to whittle away at their savings.

However, the service isn’t without its disadvantages. Knowing where online banking excels and where it falls short can help you pick the best virtual bank for your needs, and prepare you for the challenges you may face.

Pros of Online Banking

Most conventional banks offer online banking services, so we’ll concentrate here on the advantages that are unique to online-only banks.

Make More Money, and Keep More of It

Online banks don’t have the high overhead costs that classic brick and mortar institutions do. This allows them to pass those savings on to their customers.

With a standard bank, you’re lucky if you can find a savings account that offers 0.1% interest. However many virtual banks pay somewhere between 1% and 3%.  That may not seem like a big jump, but 2% interest is 20 times more than you’ll get with a 0.1% return.

And since most online banks charge low or no fees, and generally don’t require a minimum balance, you’ll get to hold onto nearly all of your earnings.

Free ATM Access

Most large banks let you use their ATMs for free but charge a fee for any other machine you might use, which happens frequently.

In keeping with their practice of charging few or no fees, online banks, which don’t have their ATMs will usually let you use any bank machine within a given network, like MoneyPass or Cirrus, for free. This means you’ll find more free ATMs, in more places, using a virtual bank.

Powerful Mobile Banking Apps

Because online banks are only accessible online, they tend to offer more robust, functional banking websites, and some of the most intuitive and capable mobile banking apps in the industry. If doing your banking securely using nothing but your cell phone or tablet is appealing to you, online banks won’t disappoint.

Cons of Online Banking

Nothing is perfect. Here are some of the disadvantages to online banking of which you should be aware.

Cash Deposits Can Be Difficult

Without physical branches and tellers, there’s nowhere for online-only banking customers to go to make a cash deposit. You’re either required to find an in-network ATM that accepts cash deposits or make a deposit into a standard bank account and then transfer the funds into your online account. This makes it difficult to abandon brick and mortar banks entirely, and the process inevitably requires extra steps.

Checking Accounts May Be Unavailable

Many virtual banks offer checking accounts. Choose one that does or you may need to maintain a checking account with a standard bank. This isn’t overly difficult as long as you keep enough funds in your checking account. However, if you run short, making a transfer from an online account usually isn’t instantaneous between banks. In this case, online banking requires planning and isn’t quite as nimble as conventional banks.

Security Can Be a Worry

All banks pour significant resources into maintaining a secure network. Banks are targets for hackers around the globe. There’s always the concern that hackers will penetrate the network of both traditional and online banks.

Think Before You Leap

Online banking is an excellent service, and most people would do well to add an online account to their current account list.

About: Mr. Rory Brown has focused on financial technology and investment management for 30+ years. Rory Brown is currently working on a new app that will help consumers navigate online banking. The app will connect clients with the best virtual banks in the world, where they can get comparisons on rates for home loans, auto loans, and more.

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