Free Money vs. Monthly Fees...
Sep 17 '00
In the lengthy history of the U.S. Banking industry, internet banks are simply the latest innovation to attract and keep quality investors (and their money). However, in many cases these internet banks are in competition with (not divisions of) traditional brick and mortar banks.
This competition has certainly benefited consumers. In a rush to grab investors quickly, your average internet bank offers quite a few perks besides the traditional bank's "free checking" offers. Low cost/free mutual fund investment options, substantially increased interest rates on your money market (checking), and certificates of deposit balances, ATM fee reimbursements, online bill payment and payment tracking, low cost stock trades, and convenient billing consolidation are just a few of the perks some of the online banks are giving away. These banking advantages plus referral bonuses for any new customers you attract to the site, makes you average online bank a very attractive place to do business.
Brick and mortar banks are scrambling to join players like X.com and E*Trade bank in the rush to find and keep depositors. While many of the traditional banks have now opened online divisions, some of the traditional brokerage houses have been slow to join the online banking frenzy.
When choosing where to deposit your money (online or traditional), you may want to consider and analyze potential banks in a few key areas.
Convenience: While online banks are often "always open", ATM usage fees can pile up without a local bank to provide you free access to your deposits. Ease of making deposits and moving money between different investment options should also examined.
Rates of Return: Interest earned can be greatly affected by choosing a bank with high rates of return. Be sure to investigate account balance minimums. Some banks will give you one rate (or charge you a fee) if your deposits total less than say, $1,000, and they would pay you more (or waive a fee) if your deposits were greater.
Safety: I really consider this a non-issue when choosing a bank. As long as the bank is reputable and provides FDIC insurance for your deposits, you'll be fine.
In the end be, sure to investigate all the perks available to you as a new depositor. If you are new to online banking and feel somewhat intimidated, perhaps you can start small. Make a small investment and watch your money slowly grow. When you get a better feel for the institution and feel comfortable, invest more. Currently I invest in both traditional and online banks and traditional and online brokerages. And while I certainly love all the advantages online banking/investing gives me, I'm not quite yet ready to "put it all online" (but I believe that day is rapidly approaching).
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