What Should You Know About Virtual Banks?

virtualbanksWhen someone asks you to name a list of banks in Canada, you can probably name the six most common banks.   This is due to the fact that they have a presence in a shopping centre or on every main street in cities across Canada.   In addition, we are constantly flooded with advertisements by these banks to switch, apply for loans and credit cards.   Apart from these groups of banks, there are a collection of other financial services providers that do not come to mind quickly because few have a “brick and mortar” presence.  They are referred to as “virtual banks” and serves as an alternative outlet for individuals that wish to place their savings outside their chequing account.

Here are 6 things that you should be aware of regarding virtual banks.

1. Where To Find Them?

Since you cannot physically walk into virtual bank, you will have to be referred to one.    Ask a financial advisor that is not affiliated with one of the big banks.  If you have access to the internet, you can use Google and enter the phrase, “virtual banks Canada”.  One well know virtual bank is ING Direct.

2. How To Become A Client?

If you are fortunate to know a financial advisor, he or she should have a selection of virtual banks in their portfolio of products and services to choose from.  When you decide on the right bank, you will be asked to fill out the required paperwork which includes details regarding your existing bank and related accounts.   In the event that you are not associated with an advisor, you can apply on the internet to become a client of a virtual bank.  When choosing, be sure that the bank offers services online in your province.

3. High Interest Accounts

A majority of individuals are drawn to virtual banks based on high interest saving accounts.   These accounts offer clients a higher interest rate on savings than traditional banks with the flexibility to deposit and withdrawn cash whenever they need.   These accounts are ideal for individuals who are looking to place cash aside for a rainy day without committing to any short or long term investments such as a term deposit.   From more information the current interest rate offered by virtual banks, visit the respective bank’s website or call the bank.

4. Are Deposits Safe?

All banks in Canada, including virtual banks, are regulated by the Canada Deposit Insurance Corporation.  The corporation insures deposits up to $100,000 in case of a bank failure.   Virtual banks will clearly state that they are members of the Canada Deposit Insurance Corporation on their website and any printed literature that is sent out to potential new clients.

5. Online Banking

Since virtual banks do not offer branches that clients can walk into, transactions must take place online either via the internet or the telephone.  Using both avenues, you can move money in and out of your account, pay bills and write cheques.   It is important to note that any cash transfers will come from or sent to your brick and mortar bank within a 48-hour time period.   In the event that you will be needing cash for a Saturday night outing, you will need to transfer the dollar amount on Wednesday morning from the virtual bank account to your conventional account at the local bank branch to withdraw the money via the teller or the automatic bank machine.

6. Your Current Bank Hates Them

Although there is nothing wrong with having multiple saving account at different banks, your current bank will not be happy with the fact that you are benefiting from a virtual bank.  Each time that you make a deposit into the virtual bank, your conventional bank is losing out on business and the ability to loan money to other individuals at a much higher rate of interest than they are provide you on your savings.   Knowing that you make regular deposits into a virtual banks, a representative from your brick and  mortar bank may get you to think about other investment opportunities offered by their  bank in the hopes of keeping your money internally.

Virtual banks provides alternative savings tools and financial services away from traditional banks that can be seen everywhere.   Primary, individuals that use virtual banks benefit from high rated interest saving accounts that will be translated into an increased level of disposal income in the future to spend or invest.

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