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In recent years, large companies have set up internet-only banks as a means of diversifying into the financial sector and providing personal banking services. For a company, the greatest advantage of providing internet-only banking services compared to a traditional brick and mortar bank is that this type of bank has very low costs. These savings come as a result of the low overhead costs that are associated with electronic transactions. For example, internet-only banks can avoid paying bank tellers, renting the physical location of the bank branches and other overhead costs associated with running a regular bank.
As a result of these low costs, internet-only banks are able to offer special deals such as higher interest rates on savings/checking accounts, unlimited free internet transactions and/or no-fee checking to their customers. These act as incentives and are typically unattainable at traditional banks. These benefits can be worth a substantial amount to a consumer when you realize that most traditional banks change fees every month for using checking accounts and pay little to no interest for savings/checking accounts.
As nice as these benefits sound, there are some drawbacks that should be considered before you rush off to join an internet-only bank. Seeing as internet-only banks do not have branches where you can conduct transactions, it can be hard to deposit money into your account. Someone who has direct deposit can easily direct an employer to send a paycheck to the online bank account, but for those who do not have direct deposit or want to deposit extra cash into their accounts, having an internet-only bank could be an inconvenience.
Another drawback to consider has to do with automatic teller machines (ATM) and the fact that most internet-only banks do not have their own machines. Typically, you will need to pay a fee of a couple of dollars in order to use another bank's ATM to withdraw cash. People who make frequent cash withdrawals with...
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