Investment brokers like Schwab offer many services local banks offer. In fact, they can often do a better job:

• Schwab allows you to keep money invested in equities which lets it grow far faster than any bank’s interest rates.
• Schwab offers free checks with its checking account, a practice that seems to be quickly disappearing among local banks.
• Schwab has an excellent interface for paying bills online while many banks’ online systems are sadly dated.
• Schwab reimburses all ATM fees for withdrawing cash, giving you the freedom to withdraw money anywhere if you need it instead of having to worry on vacation about whether your bank has a presence in that town.
• Schwab also will let you deposit checks by mail so you’d never need to stop by the local bank to deposit your paycheck.

With all of these features, it’s hard to see why you’d need to set foot in a local bank at all. But there are a few reasons why you might want to resist consolidating all of your accounts to a broker like Schwab without a physical banking presence.

The most vital function a local bank can provide is security. By not maintaining a physical bank building, Schwab requires checks to be deposited by mail and the USPS is far from infallible. Things get lost. When a paycheck is lost, your employer can usually re-issue it. Relatives can usually do the same thing. But sometimes you just can’t ask for a replacement. For checks that can’t be replaced, it is best to personally keep an eye on them every step of the way. Keep a local bank account open so you can be absolutely sure you get your money.

Many brokers, including Schwab, offer apps that allow you to deposit checks by taking a picture with your smartphone or tablet, which eliminates this as a reason to keep money at a local bank. Then again, there are people who don’t have smartphones and there are people who have smartphones but are not comfortable having any connection to their bank on a phone.

Because of the security risks involved, Schwab won’t generate cashier’s checks for large sums. Only a local bank will write you a check large enough to make a down payment on a house (provided you have the money with them, of course).

The main reason to keep your local bank accounts open is cash. You can’t (and shouldn’t) send cash to Schwab through the mail, so there’s no way to deposit cash and get it invested without a local bank. This is especially important for small business owners who will naturally accrue large amounts of cash and need to take it off-site to avoid losing everything to a burglar.

Remember though that Schwab reimburses ATM fees, so you can withdraw cash from any ATM.

The final reason you might want a local bank account is because many local banks have a public notary on staff. Not everyone will need this, but when you do, it’s nice to know where you can have something officially notarized. For our clients, you don’t need a local bank account for notary services as we have several on staff.

In brief, you may need a local bank account for:

• Depositing irreplaceable checks if you don’t have a smartphone or have one and are don’t want to connect it to your finances
• Writing cashier’s checks for a down payment on a house
• Depositing cash
• Notary services (or just stop by our office if you’re a client)

These circumstances aren’t common and if you think you don’t need accounts at a physical bank for your day-to-day business, you’re probably right. Simplifying and consolidating your finances wouldn’t inconvenience you too much.

But you’ll likely need one of the services above at some point. A good compromise would be to keep just one account open at a local branch with the minimum amount of money in it. Set up a Money Link order with your broker so you can move funds from the broker to that local bank account back and forth if needed.

If you do that, your finances will be as simple as possible while giving you all the benefits of both worlds.

Photo used here under Flickr Creative Commons.