As more and more of our daily activity occurs via the internet, it should come as no surprise that there are now completely virtual banking institutions available to one as well. This does not refer to the online banking services that one may receive with their normal bank account. A virtual bank account comes from a bank that is completely online. There is no local or national branch, and there are no ATM’s directly associated with online banks – they are entirely virtual. No brick and mortar required. The number of these types of financial instruments are continuing to crop up and there are many who are choosing this as the financial solution that is right for them, but is it right for everyone?

 

 

Who benefits from the use of a virtual bank account?

Virtual bank accounts are not for everyone. They have a certain level of convenience, but they also have a certain level of inconvenience for certain individuals. For those who are constantly traveling, whether around the country, or around the world, the virtual bank account is an excellent option. All aspects of one’s financial transactions occur online, and can be accessed anytime, from anywhere, making this a great choice for the businessperson on the road a lot.

A virtual bank account is not as liquid as a traditional bank account. This means that it is not as easy to obtain your cash, physically, with a virtual bank account as you can with a physical, traditional bank account. That means that these accounts are best for those who do not require instant access to their funds on a regular basis.

 

 

 

What considerations should be made when choosing a virtual bank?

Since all transactions occur online, security and the cutting edge encryption software should be requirements for choosing a virtual bank. You want to ensure that your private data remains safe and secure. There are virtual banks that offer pretty much any type of financial service – from checking and savings accounts, to low-risk investments like certificate of deposits (COD) and money market accounts.

While these accounts are not as liquid, a good number of them have agreements with existing ATM providers whereby their customers can either use a certain type of ATM free of charge, or can be reimbursed for a certain number of transactions per month. You get a debit card with a virtual checking account, just as you would a traditional, physical one. Many even offer the option of having paper checks.

Most virtual banks that are run by US-based companies are “real” banks, meaning that they are insured under the FDIC and more often than not, they are affiliated with, or owned by traditional banking institutions. Many of these banks offer direct deposits, free wire transfers, and more bank-to-bank transactions than many other banks due to the virtual nature of the all-online system.

The perks of the virtual bank account

The main perk of the virtual bank account is not what it might originally seem. One would think that the level of convenience would be the most attractive factor. While this is definitely a perk of virtual banking, it is not the biggest advantage of this new form of financial management. Virtual banks are entirely virtual. This means that there is not nearly the level of overhead or operating costs that traditional banks must have. There are not building costs, maintenance costs, monthly utility costs, and there is not nearly the labor costs associated with a virtual bank. What this means for the customer is higher interest rates on savings and investment instruments with virtual bank accounts. This perk alone is enough to make most take pause.

While a fairly new concept, the virtual bank account is an interesting and worthwhile option to look into. There are a number of different perks to having a virtual bank account, and there are also a few reasons that one might not choose to have this as their primary account. Either way, it is an excellent option for many, and can be a great way to get more out of your savings by taking advantage of the higher interest rates offered by these virtual institutions.

For those who are just starting out, or are, perhaps, new to the country, basic information about bank accounts is vital information to being a functional part of society. Keeping your money in a bank account is the safest way to handle your money. When you choose a reputable banking institution, your money is backed, up to $250,000 by the Federal Deposit Insurance Company (FDIC). This means that even if something should happen to your banking institution, the government will back up those deposits up to $250,000, adding just another layer of protection to your money.

Having a bank account is also the cheapest way to manage your money. When you have a job, but no bank account, the only options are check cashing services, which are often rife with fees. In order to pay bills or provide funds to others, one must obtain a cashier’s check or some other form of wire transfer – these too aren’t free, and the costs of doing this month after month can really begin to add up. But many are confused as to how a new bank account works, the questions they need to ask, and the terms that they need to know to ensure that they are not getting themselves into something they don’t understand.

 

Types of Banks

There are a number of different types of banking institutions, and it is helpful to have a basic understanding of each type.

• Savings Banks: Savings banks are banks that take deposits only, they do not generally offer checking account-type services. These are for-profit institutions that are also lenders. The funds you deposit into a savings bank are then used to make loans to other members of the bank. You then get a portion of the return on the bank’s investment through interest.
• Credit Unions: Credit unions are non-profit institutions that tend to be very localized in nature. These are cooperative financial institutions that are owned by the folks who make their deposits there. Credit unions do offer most common financial services, but can be made inconvenient due to the localized nature as this can mean that ATM’s are not always easy to find.
• Savings & Loans: These are similar to savings banks in that they accept deposits and pay interest on said deposits. They also then loan these funds out to other members. The key difference is that with a Savings & Loan, residential home loans are the most commonly offered loan instrument.
• Commercial Banks: These types of banks offer the same types of financial services that savings banks and credit unions offer, however, they only cater to businesses.
• Investment Banks: These banks are NOT FDIC insured and do not take deposits or offer loans. They are merely avenues through which one obtains investment advice and can purchase or sell stocks and bonds.

Considerations to Make When Choosing a Bank

For most folks, unless they are big travelers, or those who wish to do not need instant access to their funds, will do best with a traditional, as opposed to the new, rapidly rising onslaught of completely online banks. A big piece of advice to those who are looking to open a new bank account is to never make assumptions. Always ask questions so you know the terms that you are agreeing to when choosing a new bank account.

One of the first questions you will need to ask is if the bank has a multiple account requirement. At many credit unions, for example, one must open a savings account in order to open a checking account. There are often minimum balance requirements – which is the minimum amount of money you need to keep in your bank account at all times – when it comes to savings accounts. Though it is important to keep in mind that many checking accounts too have minimum balance requirements. If you fail to maintain that minimum balance, some institutions will close your account automatically.

You also need to find out if, for example, you are opening a checking account, if there are any annual or monthly fees. Do you get a debit card? If so, are there any fees associated with the acquisition or using of said debit card? You always want to make sure you inquire about any possible fees, that way you are not surprised by seemingly errant charges. It is also vital that you inquire about the number of available ATM’s – both locally and nationwide – as well as the fees associated with using outside ATM’s or using “home” ATM’s on a regular basis.

Direct deposit is fast becoming the choice way to pay and be paid, so it is vital that you check with your prospective institution to see if they offer these services before making your final decision. When you choose to be paid via direct deposit, instead of your employer cutting you a physical check, your employers bank transfers the appropriate funds to your bank account directly.

Overdraft access is a common benefit that many will elect to have with their bank account. This is a quasi-safety net that not all who open a bank account will qualify for. In a nutshell, overdraft access is essentially a small line of credit attached to your checking account. Should you be lacking on funds, or have more outstanding charges than your available balance can cover, you will be able to use the overdraft funds to cover these without excessive charges or bounced checks. Many choose not to use this, however, as one has to pay off the overdraft balance before they can begin to use their own funds again.

Checking versus Savings

A checking account is the best financial instrument to use for routine, daily financial transactions such as paying bills, purchasing groceries, and other small items. These are the funds that will be added to and taken from on a regular basis and are often associated with a debit card or paper checks, which makes the use of the money in this account much easier.

With a savings account, conversely, you want to use put money that you do not plan on using in it. This is where you squirrel away money for a rainy day. There is often a minimum deposit required to open a savings account, and many banks will have a minimum balance requirement on their savings accounts. Savings accounts, due to the stationary nature of the funds they contain, offer interest. This is because your funds are lent out in the form of loans. The interest is your portion on the return on the banks investment. A good interest rate for a savings account is 1.05% APY or higher.

While this may all seem rather confusing upon first blush, it is something that one gets down very quickly. Having this basic knowledge of how new bank accounts work, as well as questions and considerations you will need to make when choosing the right bank for you, will stand to make the process far easier and more rewarding.

Banks, just as with other types of businesses, are always looking for ways to garner new customers or to draw people away from the competition. One way that banks have started to do this is through the process of incentivizing banking with “x” institution. These checking account promotions and other checking account offers are great ways for you to choose a bank, and get a little something extra for choosing to go with Bank X over Bank Y.

Banks Compete for your Business!

Though many might not think about it, banks need your business, as this is how they do business. Through accepting your deposits, they can then give out loans to you or other customers of the bank, if you have a savings account, you are then rewarded through the process of earning interest. This is, for all intents and purposes, the return on your “investment” each month. Many of these checking account offers are excellent deals and can make or break one’s decision as to which bank to choose. They can also sway one to switch banks – which isn’t nearly as difficult as it once was.

Checking Account Promotions

The key to these checking account promotions is to know they exist, know what types of incentives or offers are commonly available, and where to find good information about currently available offers. While this article will touch on some currently available checking account promotions set to extend through the year 2011, a quick web search is a great way to find the latest information, details, and requirements for qualifying for certain promotional incentives or offers.

Most commonly, banks will offer you a cash reward or “free money” by way of cash-back bonuses, incentive money deposited into your account upon opening a new account, or even gadgets. Sometimes, special banking offers will be used as incentives, such as offering a higher end checking account sans the usual annual fee, higher rates, and more. These checking account promotions can be local or national, it is important to keep that detail in mind when looking into prospective offers.

Currently Offered Checking Account Promotions and Checking Account Offers for 2011:

• First Bank: At First Bank, when you open a new checking account, you receive a free flip camcorder.




• PerkStreet Financial: When you open a bank account and subsequently use your debit card at PerkStreet Financial, you qualify for excellent cash-back awards that can glean you as much as $600 a year.




• Bank of the West: At this local bank, when you open a checking account and either maintain a $500 a month direct deposit, pay 10 bills online through their online bill pay service, or use your debit card 20 times, you get a free iPod Touch.




• M&T Bank: M&T Bank, like many banks, offer different “grades” of checking accounts. Depending on what type you open, you can earn $125, $200, or $250 for simply opening an account.




• Chase Bank: At this well-known national bank, when you open a new account and either set up direct deposit, or complete 5 debit card transactions, you will receive $100.




• PNC Bank: When you open up an account with at least $400, you will receive $100 after maintaining that balance for a few months time.




• Bank of America: This is yet another well-known, national bank. When you sign up for a Bank of America Debit card, you automatically get 3,000 bonus airline miles. It should be noted, however, that there is an annual fee of $30 with this type of account. However, you also earn 1 mile per every $2 in purchases you make using your Bank of America debit card.




• ING Direct “Electric Orange”: “Electric Orange” is the name of ING’s completely online checking account service. You get $50 when you create an account with Electric Orange online, following the link on ING’s website.




• Capital One Interest Online Checking: This is Capital One’s version of an online checking account instrument. When you open an account with $1,000, you can earn upwards of 1.01% APY on any balance over a penny that you maintain. This account also has no minimum balance requirements.

Conclusion

Depending on your wants and needs, any one of these checking account promotions and checking account offers might be attractive to you. As with any type of financial decisions, it is not recommended that you make your choice in bank based solely on the one-time incentives you receive by banking with a certain institution. You should choose an institution that will meet your needs, and it is not difficult to find one that meets your needs, and also has a decent promotional opportunity available as well.