More banking choices

You have more options than simply whether you want a big national bank or a little local bank. There are online banks that have no branches at all, and banks that aren’t technically banks.

Virtual banks

Some banks have no physical branches at all. They’re entirely virtual — they exist only online. You open your account online, contact the company online, order checks online, everything. Since there are no branches, you’ll need to mail in your deposits or have them transferred electronically — for example, by direct deposit from your employer. You can either use special personal finance software to connect to your bank and your records, or you can use your Web browser to connect with the bank’s site directly.

Virtual banks tend to have lower fees than brick-and-mortar banks, which makes sense — they don’t need to pay for real estate, tellers’ salaries, or the electricity that runs the lights while you’re standing in line. They also tend to pay higher interest rates on your deposits. And they’re safe. All online banking systems generally use the latest, strongest network security to protect your money and your personal information.

But not all online banks offer all the services you may want. For example, some have savings accounts and offer loans but don’t have checking accounts.

One alternative to a traditional bank is a credit union. These not-for-profit financial institutions are created to serve the memberships of certain organizations, such as alumni of a certain college, members of a union or employees of a company, and so forth. Each credit union is different, in terms of eligibility requirements, size, convenience, and cost, so be sure to compare any credit union you’re eligible for with other banking options you’re considering.

In addition, many brokerage firms — companies that handle investment accounts — offer their customers certain traditional banking services, including checking and savings accounts. If you happen to be a brokerage firm customer, you may not need a separate bank. But brokerage firms generally require fairly high minimum account balances.

Click here to compare some of the distinguishing features of various types of banks.

Click here for a list of questions to ask before you choose a bank.