Here’s what to know about the checking and savings account alternative.
What is an internet bank?
An internet bank — also known as a virtual bank, an online bank, or a web bank — is a bank that lacks any physical branch locations and exists only on the internet. By eliminating the overhead costs associated with bank branches, internet banks consistently offer interest rates, including money market yields, that are higher than the national average.
Internet banks are accessed via web browsers and mobile apps, providing customers with banking services from any place with access to the internet. Internet banks generally do not offer their own ATM services, although they often work with other banks and organizations to provide no-fee or low-fee ATM access for their customers.
The biggest strength of an internet bank is also its greatest weakness: If internet access is spotty or lacking, customers cannot access their accounts. In addition, there are security issues to keep in mind. Accessing one’s internet bank account via an unfamiliar or unsecured public Wi-Fi hotspot carries a certain level of risk, and there is the ever-present threat of hackers taking down an internet bank’s website.
Nearly all traditional banks offer online banking services that are very similar or indistinguishable from internet bank services. This helps regular banks provide banking services beyond the footprint of their physical branch network.
Internet bank example
If you use a bank that is accessible online and doesn’t have a physical branch in your area, you are using an internet bank. Some popular internet banks include Discover Bank and Synchrony Bank, which both utilize extensive online networks and are accessible by web and phone only.
Are you puzzled by internet banking? Here are some of the biggest online banking myths debunked.