The first choiche you have to face when you want to open a bank account (or when you want to invest some liquidity), is “to who” you want to entrust your money. One important distinction is between online banks and “traditional” banks.
Some people are afraid to use online banks, or “virtual banks”, as someone says: but I think “virtual bank” is a misguiding term, since online banks are real banks, and only the “interface” to clients is different – using telephone or web instead of counters and clerks.
Personally I favour online banks. First of all because the opportunity to operate via web – whenever you want, wherever you want – is an important benefit. But there are two other factors that should be considered.
- On a large scale, online services should allow the bank to save up money, and these savings can be (at least partially) reflected to clients. Therefore, in average, online banks should offer higher interest rates. [Note we said “on a large scale”: it isn’t trivial to offer high quality and secure web services, even if many banks have resources to face these challenges]
- When you invest your money, it may be better not to have a person as intermediary. A financial broker earns money on what he sells, and therefore – understandby – he may try to convince you to buy something that fits his needs, instead of yours. This does not mean that financial broker are disonhest, but simply that they cannot be considered an indipendent source of information. Instead, a website of an online bank can try to convince you to choose an investment only with clear and comprehensive information, and it can’t hide drawbacks with gift of gab.
Clearly, this is not an absolute rule. In some cases it may be better to have a bank clerk in front of you. But I think this is true only when you need an high personalized service, or you want (and can) negotiate conditions.
We can end this post with a “moral”: the most important thing is to enquire and gather information, to know exactly where you are putting your money. When you use an online bank, you are someway forced to do it, but you don’t want surprises even if you are in a “tradirional” bank.
Italian translation of this post: Banche online o tradizionali?
Banche e Risparmio [http://www.banknoise.com]
