Online banks, by very definition, have no brick and mortar locations and, therefore, no associated overhead costs for maintenance and operations of such physical locations. Consider the basic costs of owning or leasing a traditional space, including a mortgage or rent, upkeep of the facility, utilities, and various forms of insurance. Think, as well, about the costs for staffing a physical location with tellers, bank managers, and security guards, and the signage and other marketing expenses tied to a bank branch. Now multiply those costs by the number of locations a given bank has, add the costs of owning and maintaining numerous ATM locations, and the numbers become staggeringly high very quickly.
For online banks, however, many of these costs are eliminated, which translates into big savings for the banks and good news for customers looking for more financially friendly banking services. Electronic transaction-only banking generates very low overhead, comparatively, and allows online banks to pass their savings on to the consumer in the form of special offers and services. For instance, higher interest rates on checking and savings accounts are commonplace from online banks, which translates into more money in your accounts. In fact, according to current rates, online banks offer almost 4 times higher rates on savings accounts than their traditional brick-and-mortar counterparts. Lower mortgage and loan rates may also be offered, which leaves more money in your accounts, and some online banks may offer higher yield checking accounts and CDs than traditional banks. Pardon the pun, but those things literally are money in the bank.
There are other financial benefits of online banking such as checking and savings accounts with no minimum deposit and no minimum balance. That is good news for depositors that do not have large amounts of money sitting in their accounts, and it helps them avoid fees and penalties for falling below the minimum. And as it pertains to fees, low-to-no fee accounts, such as free checking and other accounts with no monthly maintenance fees, are more readily available from online banks than from their traditional brick-and-mortar counterparts. Considering that recurring monthly fees can range from $3-4 per month to as much as $10-12 per month or more, a no maintenance fee account could mean an extra $150 or more per year in your account. In addition to those savings, many online banks offer further savings via no ATM fees, low or no overdraft fees, and/or low or no insufficient fund fees. Add up the savings from the lack of fees, and that is a lot of money that stays in your account instead of going to the bank.
All-in-all, online banks offer numerous avenues for greater savings and higher earnings than many traditional banks with physical locations and all the costs related to them. Those financial gains may be traced directly to the savings in overhead by online banks. If you are looking for opportunities to save money and earn higher returns on your investment, then online banks just may be the answer for you.