Released: August 03, 2007

Break the bank: Go online

Source: Carolyn Bigda, Money Magazine

Here’s a familiar scene: Lunch hour at the bank, and you’re waiting in line for a teller. You’re there to deposit a few paper checks, as well as to ask about a service charge you noticed on your last statement (which annoyingly wipes out any interest you earned). The minutes tick by as your stomach growls, and you begin to think: There’s got to be a better way.

Well, there is, but you won’t find it at the bank around the corner. Instead you have to go to financial institutions that exist online and only online. The first virtual banks were generally limited to high-yield savings accounts, but today’s “pure play” Web banks such as E-Trade and EverBank offer free ATMs and check writing.

There are no branches, but you probably use those less frequently anyway: 41 million households now do some form of banking online, a number that’s expected to nearly double by 2011, according to Forrester Research. (Even some old-style banks are trying to get into the game by setting up Web-only divisions.)

But without an expensive branch network, Web banks can offer higher yields and charge lower fees. Why sacrifice a fatter balance just so you can wait in line? For the illusory sense of security a branch offers? For some lollipops at the door? Here are four reasons why it’s time to make the move.

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