Should You Drop Your Traditional Bank for a Virtual One?

NEW YORK (MainStreet)—Online banking is getting easier as consumers can now tap into their brokerage and credit card accounts to open checking and savings accounts.

Now even credit card and brokerage companies are jumping into the mix, offering consumers even more options without ever entering a bank, paying monthly fees or establishing minimum balances. One company is offering its banking services entirely via mobiles and allows you to pay what you think their service is worth each month.

Discover Card and Capital One are the latest credit companies to enter the market. Most credit card and brokerage companies are offering competitive interest rates, and the option to use any ATM since the fees are refunded. Discover will pay its customers $0.10 for every debit card purchase, online bill payment and paid check they write.

Many credit card issuers such as Citibank, Chase and Bank of America offer checking and savings accounts to consumers, because they are chartered as national banks and have a national network of branches, said Ben Woolsey, director of marketing and consumer research at, the online credit card marketplace. Their retail banking business predated their credit card operations.

Credit card issuers that have recently entered the fray obtained bank charters that allow them to take in deposits in the form of savings and demand deposit accounts, he said.

"Their motivation for doing so are to access an additional and relatively inexpensive source of capital to help fund their credit card lending operations, to diversify their sources of revenue and to broaden their customer base to include those who may or may not have or want credit cards," Woolsey said.

Since these "virtual" banks lack a brick and mortar location, consumers face a draw back, because they can not walk into a branch to speak to a bank officer or a teller in case a face-to-face discussion is needed to resolve an issue, he said.