- Brick and mortar banks are the institutions located at the corner or in the local shopping mall. This is a place where you walk in and conduct financial business with real people. Virtual banks don't have actual financial centers that you can walk into and conduct business via the Internet or through the mail. Brick and mortar banks also have online banking services. If you are merely looking for the convenience of online banking, start with your existing bank to see what its online services offer.
- A virtual bank does not have the overhead that a brick and mortar bank does. It does not need customer service personnel at each location, it doesn't need physical locations and can minimize costs of utilities, supplies and services. Because of their lower operating costs, virtual banks are often able to offer better interest rates on long-term savings compared to your local institution. For money that you are looking to keep in a time certificate or savings account, shop around with virtual banks to see who has the best rates for the term you seek. Don't only look at an advertised promotional rate either. Some banks offer better deals with shorter terms while others are more competitive with longer terms.
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If you have assets that exceed the $250,000 FDIC coverage you may be looking to diversify your assets among institutions for additional coverage. (The limit is per institution, so by having money at several FDIC member banks, you increase your coverage.) You may be able to diversify at other local institutions but you may also be attracted to higher rates for savings.
When looking at online banks, read the fine print. Make sure the institution is an FDIC member bank and not a subsidiary of a brick and mortar bank. This may give you false hope of coverage. Go to FDIC.gov (see Resources) to look up specific institutions. - While any bank can do a wire transfer from an account to another institution, if you will be do this often you will want to determine the fees associated with each transaction. You may also be able to set up an ACH debit or credit system on an account for incoming paychecks and outgoing bills or e-checks. This process often does not have a fee associated with it but does take approximately three days to process. If you are looking to have money going to other bank accounts, evaluate how you are able to get money and how quickly in the event of an emergency. Review the debit cards associated with the virtual institution with the number of network ATMs, charges for being out of network and withdrawal limits on your account.
- If you are looking for a complete bank, shop around. Many virtual banks don't offer a complete array of services such as business and merchant accounts, mortgage lending or investment services. Many others do. Review everything that a virtual bank offers and determine what services, if any, you will need. If you don't need them and you won't get as high of a rate as you would somewhere else, keep looking. If you would benefit from having everything in one location, find the place that fits most of your needs best.
