Well, looky here… It seems that Money Magazine has finally stepped into the 21st Century and is now fully embracing online banks. That’s right, in a recent article, they state that:
“Online-only banks have finally come of age. It may be time to leave the corner branch behind.”
They then go on to list the following four advantages of online banks…
(1) Yields. Given that many brick and mortar banks are paying almost nothing in interest, the 5-10X higher rates that can be found online certainly are attractive. In fact, even amongst online banks, there are some disparities. Click through to see my list of online savings account interest rates.
(2) Convenience. With the advent of online-only checking accounts, such as ING Direct’s Electric Orange, you can now easily access your funds via ATM or electronic check. And guess what? Many online banks reimburse ATM fees (to a point). To be honest, I’ve never felt that electronic transfers were an inconvenience. In fact, to this day, we just transfer funds to our local checking account whenever we to access our money.
(3) Service. As they say in the article, “With an online bank, the only thing you’re giving up is the opportunity to sit with someone in a poorly decorated cubicle.” Amen to that. I’m a total do-it-yourselfer, so I’m happy to have a self-service interface. In the rare instances that I need it, there’s always phone and/or online support.
(4) Control. This is so very true. It’s incredibly easy to switch from one online bank to another in the event that rates change. In fact, you can do it while sitting on your couch in your underwear eating Cheetos.
What’s funny is that, with the exception of online-only checking accounts, none of these things are particularly new innovations. So what’s the news here? In my opinion, online banking came of age years ago.
As for my favorite online banks, I’d have to go with the following as my top two choices:
» HSBC Direct
This is where we keep a lot of our money. The high APY and convenient (if not particularly flexible) interface make this one of the most competitive options out there.
» ING Direct
We also have an account at ING. While the interest rate is significantly lower, ING is fantastic for managing money in subaccounts. In fact, we have subaccounts set up there for each of our boys, and they love to log in and check on their money.
To be fair, we also have an account with Emigrant Direct. However, after their online “upgrade” debacle of a year ago, I no longer trust them.