1. Banking 101

Online Only vs. Brick-and-Mortar Banks

One of the biggest decisions you’ll need to make is whether to choose a bank that is entirely internet-based or one that has both a physical and online presence. Most banks nowadays have a strong online presence even if they started out as brick-and-mortar institutions, which means that regardless of which bank you choose, you will have access to features such as online bill pay, mobile check deposit, and apps that let you bank anytime, anywhere from your computer, tablet, or smartphone.

What are the main differences between online-only banks and banks where you can walk into a branch and talk to a teller? Generally, it’s fees and interest rates. Because online-only banks have much lower overhead, they can pass those savings on to consumers by not having monthly maintenance fees or minimum balance requirements, and they can afford to pay a higher interest rate on savings accounts and certificates of deposit. Some of the big names in online-only banking are Ally Bank, Discover Bank, and Capital One 360.

That said, community banks sometimes offer the same lower-fee, higher-rate advantages that online-only banks do while also giving you the option to meet with a banker face to face. You may also find low-fee accounts at a large traditional bank, so don’t count them out without checking.

Consider what would make banking comfortable and convenient for you:

  • Do you prefer to talk to someone in person or interact with a machine?
  • Do you want to be able to write lots of checks or would you rather pay bills online?
  • Do you regularly deposit cash? (This is cumbersome to do with an online bank; you need a special ATM, money order, or other intermediaries.)
  • What time of day and day of the week is convenient for you to the bank?

Different banks have different features, and even different checking accounts within the same bank are designed to appeal to different sets of needs. It pays to shop around before deciding on a bank and opening an account.

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