“Brick and mortar” means a business has physical locations that customers can visit to conduct business. The term refers to the actual bricks and mortar traditionally used to construct the branch locations (although steel and drywall may be most visible in modern times).
In the world of banking, brick and mortar banks are banks and credit unions with branches. Many of them also offer online banking services, but the online services are optional. That's similar to retailers that offer storefronts for in-person shopping as well as websites that allow you to purchase the same goods online.
An online-only “internet bank” is the opposite of a brick and mortar bank. There’s no way to visit a branch. You can't work with a teller for deposits and withdrawals, and you can't sit with a loan officer to discuss your borrowing needs. There are, of course, remote offices where bank employees work and answer phone calls from customers, but customers don’t visit those locations.
History of Brick and Mortar
The term “brick and mortar” is only relevant in the internet age. For example, in the 1980s, there was no reason to refer to a brick and mortar bank because all banks were brick and mortar banks. Brick and mortar businesses are sometimes considered “traditional” when compared to online-only counterparts.
Once businesses started operating exclusively online without any storefront or location for customers to visit, the term took off.
Merriam-Webster reports that the term was first used in 1975, although online banking as we know it today did not exist at that time.
Advantages and Disadvantages
Having physical locations may or may not be a good thing. If you prefer to do business in person, then you probably prefer brick and mortar banks and credit unions. You can see everything in front of you, visit with a bank employee, and perhaps communicate more effectively. Plus, brick and mortar banks are best for depositing cash because sending cash through the mail is unsafe, and depositing at an ATM can be cumbersome.
However, physical locations cost money, and those costs are typically passed on to customers in the form of higher rates on loans and lower rates on savings accounts and certificates of deposits (CDs). Brick and mortar banks have to hire more people to staff every branch—instead of staffing one call center that can serve the entire country. Banks also have to pay for construction or leased retail space.
Online-only banks claim that they offer better deals because they don’t have to pay all of the overhead associated with brick and mortar locations. There’s probably some truth to that: Online banks typically pay the highest interest rates on savings accounts, and they’re likely to offer free checking.
With mobile apps, you can accomplish many of the same things you'd do in a branch. You can deposit checks by taking a photo of the check, and you can pay bills easily online. When problems or questions arise, online banks offer customer service by phone, secure messaging, or instant chat.
Physical Branch Advantage
At the same time, physical branches still offer valuable services that you can't get from an online-only bank. Branches sell cashier's checks and money orders, notarize documents, and hold safe deposit boxes. You can get those services from a variety of other places (usually), but it might be easier to do everything at the bank. Plus, you get important documents instantly—instead of needing to order a check online and wait for it to arrive by mail.
Even in the age of online banking, you still probably need an account with a brick and mortar bank or credit union. Online banks typically link to your brick and mortar account, although it may be possible to bank exclusively online. Having an account with a local institution is smart, as it enables you to take care of important transactions in person, and you may occasionally require additional services (during crucial life events). The question is how much of your banking will you actually do through that bank.
How to Start Banking Online
If online banking sounds appealing, we've highlighted some of the best offerings available to consumers nationwide.
You may have excellent options available from banks and credit unions in your area, and you may find it satisfying to support local businesses. But if you need additional ideas, the pages above can help you get started online quickly.