Are you ready for an Internet bank?
Apr 14 '00
I currently have two banks, one brick-and-mortar (Bank of America) and one online (NetBank). I have had my checking and savings accounts at BofA for many years, mostly because it's convenient - a main branch is in the building where I work, my employer is a major customer and so employees get a discount on fees, and I can direct deposit my check there. My husband's employer is also a major customer and so we could get a break on fees that way as well if we needed, and my husband's check can also be directly deposited.
The checking account is your basic, no frills, brick-and-mortar bank account - no interest, minimum balance required to avoid the maintenance fee, no incentives. The savings account is your basic, no frills, brick-and-mortar savings account - low interest, minimum balance required to avoid a fee, no incentives. Let's face it, regular bank savings accounts are terrible, paying 1.5% interest *if* you're lucky, and many checking accounts pay none at all with ridiculously high maintenance fees.
Since we were starting to put together a nice amount of money in our savings account, I began looking at the online-only banks to see what was available and if things were better online. Wow, what a difference! Even though they all vary somewhat in the exact terms and features, overall they still just blow away their offline brethren. I finally settled with NetBank, because I felt they had the best features and interest rates combined, had a better website interface, and had been around for a few years (an eternity in the Internet world!).
We first opened up a money market account that pays 5% interest no matter how low your balance is and promptly sent off a small deposit to start. After a few months without any problems (interest credited promptly, online access without trouble, additional deposits credited timely), we opened up a checking account. Their basic checking account pays 3% interest again, no matter how low your balance is and has no maintenance fee. Right now, I only use the NetBank checking account for shopping online so I only keep a few hundred dollars in it and the rest goes in the money market account.
Now I have to admit that I'm not quite ready to jump wholeheartedly into online-bank-only banking. I still like to know I can just go downstairs from my office if we have a problem with our main checking account. But I never have to do that <knock on wood>, and in fact, I rarely have to go to the bank at all. Our paychecks are direct-deposited into Bank of America (and could be direct-deposited to NetBank if we chose). Any checks that come in for rebates, online rewards programs and such are mailed to NetBank for either the checking or money market account. The rare time I have to go to a "real" bank is to deposit coins or get a cashier's check. We keep a minimal amount in the savings account at BofA just to keep that account open.
But now that I've had online accounts for nearly a year, I'm about ready to try and use the checking account for bills. We keep a rather large reserve in our BofA checking account to ensure we don't have to pay any fee and also to give us breathing room for spending without having to be obsessive about keeping track of it in Quicken every day or even every week. It would be nice to move that to an interest-bearing account instead of a non-interest account. And if we had our paychecks deposited directly, we wouldn't have to worry about any sort of lag time in available funds since we wouldn't need to mail those in, nor would we have to worry about those checks getting lost in the mail and never being available while checks were being cashed against that amount.
That right there, I think, is one of the main reasons people are so hesitant to use an online-only bank, because the mail service isn't guaranteed to get your deposit there in time. Who can afford a lot of bounced checks due to the deposit not being made in time?
If you've thought about trying an online bank but aren't quite ready to leave your brick-and-mortar bank, you may want to try it the way I did:
1. Research the various online banks. A good place to start when looking at the various online banks is Gomez.com (http://www.gomez.com), a site with loads of information on personal finance and more. You can get information on how online banks measure up against one another in various categories. They also have some cash-back offers listed (open up an account at X bank and get $YY back), but even though those are certainly nice, don't let that be the only criteria in choosing an online bank. Some things to consider:
Checking account -
* Is there a maintenance fee?
* If so, what is the minimum necessary to avoid the fee?
* Does it earn interest?
* What is the interest rate? Does it vary depending on balance?
* Do you get free checks? Just for a starter order or reorders, too?
* Do they have an ATM/debit card? What about a check card?
* Do they reimburse for ATM fees charged by other banks for using their machine?
* If you want this feature, do they have online bill payment? What does it cost?
Savings/money market account -
* What is the interest rate? Does it vary depending on balance?
* What is the minimum required to open an account?
* For a money market account, do you get free checks? Just for a starter order or reorders, too?
* For a savings account, do you get an ATM card? If you have both a savings and a checking, does the same card access both accounts?
Overall -
* Is the site laid out well? Try out the demo (most have them) for accessing accounts and see if it seems easy to use.
* Has the bank been in business very long? Read through the site about the bank and their history, privacy policy, and any other information that interests you.
* Be sure that they are FDIC-insured (most are).
* Are you comfortable with the site? Does it feel "right" or does it give you an uneasy feeling due to inaccuracies or being unprofessional?
2. Pick a bank you like, and open up a savings/money market account. Most online banks allow you to either complete the application online at their site (be sure the site is secure if you do!) or print out an application and send it in. I did mine online but of course that all depends on what you're most comfortable doing. They'll send you a signature card, starter checks, etc. to get your account activated.
3. See how things work. Once your account has been activated and your initial deposit has been made, wait a couple of weeks and then start seeing how the account really works. Over the course of a few weeks, send in a couple of additional deposits (mail them on different days of the week to see if that seems to affect when they're credited) and take some money out (via ATM or check, depending on the account type). Check your account online when you expect the deposit to be credited to see if it has been received. Most of my deposits are received and credited within two days - in other words, if I mail it on Monday, NetBank usually receives it and credits it to my account on Wednesday, but I don't actually *see* it in the account until Thursday, after everything has been processed overnight.
If everything works out fine over several weeks/months, then you may want to open up a checking account to use for small purchases (online or offline), just to get comfortable with using it, if you intend to try to do most of your banking with an online-only bank. Or you may choose to just keep the savings/money market account for its high interest rate while you continue to use a more traditional brick-and-mortar bank checking account. Or you may decide you'd rather skip the online bank altogether and stick with your regular bank!
There's all sorts of ways that both types of banks can be used, both separately and together. Give it a try and see which you prefer!
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Epinions.com ID:
slhansen
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Member: Steph ~
Location: Texas
Reviews written: 82
Trusted by: 82 members
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