UPDATE 10/30/07
As of October 2007, Netbank has been bought out by ING Direct. I suppose Netbank running itself out of existence was inevitable given how poorly the company's strategy had been. ING offers better rates and fewer hassles for former Netbank customers.

If you're curious to see how a bank can run itself out of business, read on. It's the story of my experiences with Netbank which I wrote back in mid 2007 ...


COMPANY OVERVIEW
Netbank is an Internet-only online bank headquartered in Georgia. These guys have been around since 1996. In 2001, Netbank merged with CompuBank, leading to a financial fiasco which still hasn't been forgotten by many irate customers.


INDEPENDENT RATINGS
http://www.bankrate.com/brm/safesound/rating.asp
Bankrate.com's star rating is 1 out of 5 stars (lowest possible) and 5 on the "safe and sound" rating which is also the worst possible. To score the lowest possible on both indexes is very difficult to achieve and it's just one of the many places which consider Netbank one of the worst institutions to keep your money.

http://www.atlanta.bbb.org/commonreport.html?compid=7217
The Better Business Bureau lists 192 complains in the last 36 months, which is a staggering number considering that the average consumer has never heard of Netbank. A good deal of these complaints were regarding service issues, but some also dealt with questionable advertising and sales practices.


WHY THE LOW RATINGS?
Fees, fees, fees. Netbank has a really nasty fee schedule listed here: http://www.netbank.com/terms_fees.htm. Some of the stuff they charge for is truly absurd, but it's left to the customer to figure out all the fine print. $7.50 account closure fee, and $25 account closure fee if within 6 months of opening. $5.00 for bill pay inactivity. $5.00 dormant checking fee. The list goes on and on. You get the picture -- these guys want to take a bite out of your account at every opportunity.

Netbank's customer service is pretty crappy too, based purely on the BBB numbers. Keep in mind, these are merely the customers who had no other recourse but to ask the BBB for help. The true number of dissatisfied Netbank users is much, much higher.


WHY SHOULD I USE NETBANK?
You shouldn't.

Now that I've gotten the bottom line out of the way, this company has some of the most interesting sign up bonuses in the industry. Many of them start at $75, and I've seen a few that ranged up to $250. Plainly stated, if you play your cards right, it's possible to get some decent money from this poorly rated institution.

Netbank seems to always have some promotion running, and it's probably the only way that they are able to attract new customers. Whether it's $75 or $250, you should ask yourself if you really want to deal with such a poorly run organization. Customers have to put up their own money on initial account openings, but it's possible to "turn the tables" on Netbank if you manage to score a bonus or two. After the bonuses are paid out, then it's also tricky to sever ties to this nasty corporation (more on that later).


PERSONAL EXPERIENCE
I was attracted to Netbank through a $75 bonus for opening a money market. The initial opening deposit was $1500, and the account was yielding about 3.68% at the time. Looking at the math, the $75 bonus is 5% already and then there was the interest-bearing money market yield too. All told, it works out to more than an 8% annual return on the $1500.

I carefully read the disclosures and fine print. The fee schedule was a bit daunting, but I decided to utilize this promotion.

Part One - Getting the Bonus
Funding and opening the account was straightforward. I did an ACH pull from my brick and mortar bank, and then I played the waiting game. The terms of the offer stated that the minimum was $1500, average daily balance was to be no less than $1500 for two months, and that the money market's minimum was $500, new customers only. The bonus was to be paid out within 30 days after the requirements were met. I figured it would take about 90 days to score this promo, and then I knew there would be some "nastiness" to leave Netbank.

I patiently waited three months for the bonus to post. After it didn't appear, I called them. After a few phone conversations with their customer service department, the issue finally got resolved. I was told that it must have "slipped through the cracks." Yeah, right. After another five days or so, the $75 bonus appeared. Part One was accomplished.

Part Two - Leaving Netbank
After rate comparisons with other institutions, Netbank just doesn't stack up after the bonus is paid out. There are plenty of highly rated companies who are paying over 5% on savings or money markets, so Netbank's 3-and-something percent interest isn't going to cut it. I wrote a check for a little more than $1000 from the money market into a higher yielding savings account elsewhere. This left me over the $500 minimum required to avoid Netbank's monthly fees.

The lengthy and brutal fee schedule states that account closure fee is $25 within 6 months, and $7.50 thereafter. At this point, I just need to wait another 3 months and then I'll be able to close this account. Honestly, I'm happy to give Netbank $7.50 in closure costs to move my cash to a better institution.


GENERAL THOUGHTS
Customer service, although I didn't need to contact them much, was somewhat helpful. I shouldn't have needed to call them in the first place, but they actually did the right thing and fixed my problem. They did credit the bonus properly, although it was a few days late.

The website is very slow in loading, and the interface is unattractive. I don't really care that it is exceedingly fast, but I consider the load times to be unacceptable for a bank which exists exclusively in cyberspace. Netbank has the slowest loading website of all my financial institutions, by far. There are no enhanced security features either, which is something you might expect from a bank with no brick and mortar outlets.

There are no outgoing ACH transfers available, and wires cost $20 for domestic. I did receive a pack of free checks when I opened the account so that seems to be the best way to remove money.

I recently received an email stating that the money market yields were going to drop after a quickie promo rate. They were not competitive at 3.68%, and now they are only going to get worse. It's now 3.05% for balances of less than $10,000. For balances exceeding $75,000, it yields 4.50%. Heck, you can do better than 4.50% with HSBC, E*Trade, Vanguard, or probably a hundred other banks.

For humor factor, I quickly perused the checking offerings, and the fees are simply deplorable. A snippet from Netbank's enormous and hairy fee schedule:

A $3.00 service fee is assessed for each monthly statement cycle for accounts with an average daily balance for the month of $2,500 or more. A $9.00 service fee is assessed for each monthly statement cycle for accounts with an average daily balance for the month of less than $2,500. If you opt to receive paper statements, a $3.00 service fee is assessed for each mailed statement.



CONCLUSION
In all, my experience with Netbank hasn't been bad. I actually expected that they could have been worse, but I have been very careful in dealing with this scary corporation. In order to avoid fees, it's necessary to read a great deal of fine print.

Bottom line is that they should be completely avoided unless you want to score a bonus.


You might be interested in some other financial reviews I have written:
E*Trade
Ameritrade
Apple Bank
Wells Fargo
Capital One
Sharebuilder
Emigrant Savings




Recommended: No