If you're interested in handling some of your
finances online, you might not have to switch banks. Most of the
country's big banks, and many of the smaller ones, have Web sites
that offer at least some functionality. Brick-and-mortar banks with
Web sites are sometimes called clicks-and-mortar banks. You can
talk to a teller at a branch, use the bank's ATMs, call a customer-service
line, and visit the bank's Web site.
Then there are the virtual banks -- institutions that have
no branches. You can't visit a teller and usually you have to use another
bank's ATMs. Most of your dealings with the bank are online or by phone.
You could even combine virtual banking with online
trading. E-Trade, the online brokerage, owns E-Trade
Bank, a virtual bank formerly known as Telebank. Prominent virtual
banks such as First
Internet Bank of Indiana and Netbank
allow you to link your bank account to an affiliated brokerage account.
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Some of the country's biggest clicks-and-mortar banks, including
Citibank, Bank of America, Bank One and First Union, will let you bank
online and trade online through their investing subsidiaries.
Virtual banks offer better deals on checking
accounts. That was the clear conclusion of Bankrate.com's latest checking
study. The semiannual look at checking accounts across the U.S. showed that
Internet banks clearly offered the best deals.
Bankrate.com analyst Greg McBride says: "The accounts
offered by Internet banks remain in a class by themselves relative
to the offerings of traditional brick-and-mortar banks. The list
of attributes to the accounts offered by Internet banks is extensive
-- competitive yields, lower service fees and bounced-check fees
than brick-and-mortar accounts, more modest thresholds needed to
avoid fees and a predominant number of accounts that are free or
lack monthly service charges."
If that sounds good to you, Bankrate's research department
helps you find the best deals from among the Internet banks with its comparison
of Internet banking deals.
Customers of virtual banks have to bear one major financial
disadvantage: ATM surcharges.
Most brick-and-mortar banks don't charge their account holders
for using the bank's own ATMs. In other words, if you have an account
at FirstMegaBank, you can use its ATMs free.
But if you have an account with another bank, FirstMegaBank
will charge you to use its ATMs. Most banks levy these ATM surcharges.
Since most virtual banks don't own ATMs, their customers have to pay surcharges.
Some virtual banks will reimburse you for a few surcharges,
but other virtual banks make you pay all surcharges. If you're a frequent
ATM user, it might be cheaper to keep an account at a brick-and-mortar
and clicks-and-mortar banks offer more convenience. It's nice to be able
to drop in on a teller during your lunch break, or to complain to a branch
manger when the bank makes a mistake. You can't do those things with an
online bank. And with many online banks, you can't make a deposit at an
harder to make deposits at online banks. With most, you have to mail deposits
or transfer money electronically from another account. Even if you set
up direct deposit for your paychecks, you still get the occasional check,
whether it's a gift, a payment at a garage sale, or a product rebate.
A few online banks have attacked this problem aggressively.
Bank, for example, lets you drop off noncash deposits at Mail
Boxes Etc. locations, and so does National
Other banks make arrangements with regional ATM networks
to allow account holders to make deposits at the machines. Juniper,
Internet Bank of Indiana are among the online banks that take
deposits at ATMs, but the banks cover some areas better than others.
Accounts that are insured by the Federal
Deposit Insurance Corp. are covered regardless of
whether the bank is virtual, clicks-and-mortar,
or brick-and-mortar. Your money, up to $100,000
for non-retirement accounts and up to $250,000 for
retirement accounts, is safe at an FDIC-insured
As always, you should zealously guard the user name and
password of any online accounts. That's the most important security step.
Banks have a pretty good track record when it comes to security.
All banks, whether they are virtual or not, have to abide
by federal privacy laws and regulations. The rules are not particularly
strong. Most financial institutions will share information about
you with corporate affiliates and outside marketers unless you deny
permission. A few have "opt-in" policies, meaning they won't share
your information unless you give permission.