What is a Virtual Bank Account?

A virtual bank account is a type of bank account that exists online only. Most banks offer some type of online banking service, but true virtual banks usually do not have physical branches or ATMs. With a virtual bank account, most transactions take place over the Internet.

Many types of bank accounts can be virtual, including checking accounts, savings accounts, certificates of deposit, money market accounts, and so on. Users typically use the Internet to check their account balances, transfer funds, and perform other routine transactions. Some virtual bank accounts offer online bill payment services, which eliminate the need for writing and mailing physical checks when paying bills.

Although virtual banks don't usually have their own branches or ATMs, customers still have ways of accessing their money. For example, some virtual banks identify partner ATMs, from which customers can withdraw their money without a fee. Other virtual banks sometimes reimburse a set number of foreign ATM transactions each month. If free ATM use isn't an option, customers can usually get cash back at point-of-sale transactions by using their debit cards.

Most online banks allow customers to sign up for a new account from their website. The account-opening process may be time-consuming, often involving account paperwork being mailed or faxed between the bank and the new customer. Once the account is opened, the customer typically has electronic access to his account and can perform most transactions online.

A virtual bank account has a number of advantages over a standard bank account. Since virtual banks don't have physical branches, their overhead costs are much lower than traditional banks. Many virtual banks pass on these savings to the customer by waiving bank account fees or offering higher interest rates on savings accounts.

In addition, a virtual bank account is often seen as being more convenient than a traditional bank account. Customers don't have to restrict their transactions to banking hours; they can usually complete nearly any transaction they like any time of night or day. Services like online bill pay help cut down on time spent paying bills, as well as the cost of stamps, checks, and envelopes.

Some people are put off by the disadvantages of online banking, however. One of the biggest drawbacks of virtual bank accounts is that there's no physical branch to accept deposits. Customers with virtual bank accounts usually must either use direct deposit or send their deposits by mail. Some people find that they miss the personal service of a physical bank. In addition, many people are wary of doing their banking via the Internet; PC viruses and spyware may put virtual bank account customers in danger of identity theft.