Brick and Mortar: What does it Mean?

Brick and Mortar Banks

Retail Space
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“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 (or perhaps flimsier construction) used to construct the branch locations.

In the world of banking, brick and mortar banks are banks with branches. Many of them also offer online banking (just as many brick and mortar retailers allow you to make purchases online), but the online services are optional.

To look at it another way, an online-only “internet bank” is the opposite of a brick and mortar bank. There’s no way to visit a branch or take care of business in person. There are, of course, 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. 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 operations.

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 1992.

Advantages and Disadvantages

Having physical locations might or might 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, have a bank employee point things out (with helpful finger pointing and facial expressions), and perhaps communicate more effectively. In addition, brick and mortar banks are best for depositing cash because moving cash through the mail is unsafe, and depositing at an ATM can be cumbersome.

However, a physical location costs 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 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). They also have to pay for construction or leased retail space.

Online advantage: 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 higher interest rates on savings accounts (the APY), and they’re more likely to offer free checking

Branch advantage: at the same time, physical branches still offer valuable services that you can’t get from an online-only bank. Branches sell 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.

Ultimately, you probably have to have some kind of account with a brick and mortar bank. The question is how much of your banking you actually do through that bank.