During the last decade, online banking has become one of the fastest growing Internet activities.  Online banks, also called virtual or direct banks, have no physical network of branches. Proponents say the resulting lower cost structure allows online banks to offer reduced fees and more competitive rates.

Online bank customers can bank 24 hours a day, 7 days a week from home or office via the Internet through secure websites, by phone or chat, or via mail using postage-paid envelopes.  Deposits can be made online using scanning applications provided by the bank.  Disadvantages of using an online bank include the inability to make cash deposits and waiting longer for physical items such as certified checks (these can take 7 to 10 days to arrive in the mail).

Another alternative to the traditional bank is a credit union.  These non-profit membership co-ops provide most of the services of a traditional bank. However, fans say credit unions deliver more personal customer service.  Being non-profit, credit unions may pass savings on to their members in the form of lower and fewer fees and more attractive rates, just as online banks can. Membership usually requires an affiliation of some sort through employment or other connection.  For example, one prominent credit union serves mainly current or former members of the military.  But, as Mark Huffman of ConsumerAffairs.com points out, “Over the years, these requirements have been loosened to the point that almost all consumers can find a credit union they can join.”

Keep in mind that switching banks can be complicated.  For example, direct deposits have to be rerouted to the new account.  Any automatic periodic bill payments also must be set up anew.  Some banks offer Switch Kit, a step-by-step guide (including forms, telephone numbers and other information) to walk consumers through the process of getting a new bank account up and running.