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You Still Need A Brick & Mortar Bank

In the last ten years I’ve watched the online banking marketplace explode in terms of options. Ten years ago there was only one online bank – ING Direct. Today, you have dozens of them with more opening their doors each quarter. Their appeal is obvious, higher interest rates, and the allure of a high yield savings accounts [3] is continuously balanced against the possibility that their website could go down.

It’s not uncommon for a financial institution’s website to go unavailable. In the last few years, we’ve seen several banks have periodic outages (most notably when the Emigrant Direct’s website was inaccessible for several days back in 2008) for inexplicable reasons (at least, with reasons they haven’t explained to the public). You wanted to chalk it up to the frugal necessities of the online bank, but just recently we saw that Bank of America’s website was unavailable [4] for several hours. It wasn’t some small community bank with a crappy website… it was Bank of America, one of the largest financial institutions in our nation.

(Incidentally, here are some tips to prepare for an online bank website outage [5])

The lesson I took from this was that while online banking has experienced a boon in the last decade or so, you still need a brick and mortar bank. With the rise of online checking accounts, many people considering dropping their brick & mortar accounts in favor of a higher yielding checking account. While I think it’s a great product, who wouldn’t want to earn more interest, you still need to protect yourself because websites go down.