Exploring the growing world of online-only banks

With the reputations of many corporate banks down the tubes, several new online-only banks have emerged in recent years. They are able to offer fewer fees and lower interest rates, considering the fact that they require less money to operate. These institutions have no buildings to build or pay rent on, fewer employees to pay and are largely paperless. But how do they work? What do you do when you have to "go to the bank" when there is no physical bank to go to?

The transition is not that rough, considering that his generation is getting more and more used to handling its money online. So much so that actual money is something we rarely see or hold in our hands. Many employers only offer payment through direct deposit, and most of our bills are paid online through transfers. We are getting used to viewing our life's savings as nothing more than numbers on a screen.

Even patrons of traditional banks visit their online portal exponentially more often than they ever stop by a branch. It is hard to imagine the way life was before you could check your accounts anytime, anywhere. So it seems only natural that the online-only model would emerge. But, like the traditional model, it brings its own shortcomings.

One inconvenience of the online-only model comes with the need for cash deposits. For a service industry worker, whose income rolls in as cash, a physical building is the easiest and most secure place to deposit large amounts of cash on a regular basis. To get your cash into an online-only bank, you must first stop by a post office or convenience store to purchase a money order and then mail in the money order. A few places offer free money orders, but most sell them with a charge of at least a dollar or two. This plus the added cost of postage may discourage cash earners from depositing money as often as they safely should.

The opposite side of the cash dilemma is getting cash to spend. Even in the Internet age, many cash-only restaurants, bars and casinos continue to thrive. Online-only banks typically do not have their own ATMs, which means you will likely be charged a service fee every time you need to withdraw cash. The only good news here is that a select few online-only institutions will actually reimburse you for the ATM charge — another thing they can afford to do because of the lack of overhead.

Banking can be confusing at times, and it helps to have someone to guide you through it. Though several online-only banks have been lauded for their excellent over-the-phone customer service, there is still nothing like being able to walk into a branch and sit down with someone who can answer questions for you face-to-face. But these meetings, like many other things, may eventually become a thing of the past.