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Online Banking Comes of Age?

Written by Nickel - 12 Comments

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.

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Published on August 8th, 2007
Modified on March 12th, 2009 - 12 Comments
Filed under: Banking, Online

About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

12 Responses to “Online Banking Comes of Age?”

1
Chris Says:
August 8th, 2007 at 9:34 am
Honestly, aside from originally opening my first account many many years ago, I’ve never set foot in the bank. Once, I think, to deposit a check when they were out of deposit envelopes at the drive-up ATM. Even the brick and mortars do just about everything online or by phone now. They just, oddly, don’t offer the perks that online banks do.

I’m keeping my eye on HSBC and ING (who I have an account with). Right now my cash is in FNBO, but the special 6% rate is about expire in September. Hopefully they’ll drop it to something competitive, 5+%. They were 5.25% prior to the campaign.

I love INGs login system.
2
Josh Says:
August 8th, 2007 at 9:37 am
I have both an electric orange account, and an hsbc savings account. You cannot beat the convenience like you said of these online accounts. Maybe the rest of the population will finally realize how to make money work for them.
3
Beth Says:
August 8th, 2007 at 10:07 am
I’ve never been to my credit union–I’ve been a member since somewhere in my teens when my dad opened a savings account for me, and ever since I started working nine years ago, it’s been my regular checking account, too. Even for my car loan, I was able to call in and get approved, and fax the appropriate papers. Come to think of it, I only have a general idea of where it is.

I’ve since moved the main bulk of my savings to online accounts for the higher interest rate.
4
Matt Says:
August 8th, 2007 at 10:53 am
I love online-banking. The only time I really go to a branch is if I need to cash a check or hit up an ATM from that bank…
5
Easy E Says:
August 8th, 2007 at 12:32 pm
I’ve used Everbank.com for about a year and a half now. I love it. I will never go back to traditional banking. My interest rate is good and I never have to pay ATM fees.
6
MITBeta Says:
August 8th, 2007 at 1:55 pm
I’ve been using online-only banks for 10 years now and have gone through a bunch of them. Clearly the big reason to use them is the better rates, but I’m continually surprised by how poorly they leverage the very technology that makes them so unique. One bank I was with ages ago notified me by mail that I had overdrawn my account (due to insufficient funds on online bill pay) multiple times in the same day, incurring a $25 charge each time. It took a week for the mail to arrive. Would it have killed an online bank to send an email? My current bank has an alerts feature, but I still find that it takes anywhere between 12 and 24 hours to get notified that something happens. How come I can get the Red Sox score sent to me on my cell phone in real time, but an online bank can’t send alerts to events as they happen?

@Easy E: I’m glad to hear a good endorsement of Everbank — my bank was just purchased by them, which is interesting because I was thinking of switching to Everbank anyway. I’m waiting — patiently — for the transaction to be complete and to be rid of my old online bank…
7
John Says:
August 8th, 2007 at 3:38 pm
MITBeta:

If you are talking NetBank, I am leaving them before the merger with Everbank because EverBank charges a $4.95 per month fee for online bill pay if you do not maintain a $1500 balance.

No thank you. I’m actually going back to a bricks-and-mortar bank that has no fee checking and free online bill pay. And lots of local ATMs. I keep my savings online at Emigrant (don’t know what nickel is referring to, but I “trust” them as much as any bank).

John
8
MITBeta Says:
August 8th, 2007 at 4:06 pm
I didn’t see the $4.95 fee, but that won’t bother me too much.

I realized a month or so ago why I had such a hard time finding a bank when I was younger: I had no money. Now I don’t even bat an eyelash at the stipulation that I must keep $1500 in the account to avoid a fee. It seems like bank fees are like a regressive tax: only people with very little money really need ever pay them…
9
nickel Says:
August 8th, 2007 at 5:30 pm
John: I chronicled the problems with Emigrant in the article that I linked above as well as elsewhere on this site.
10
Karen Says:
August 8th, 2007 at 7:57 pm
“In fact, you can do it while sitting on your couch in your underwear eating Cheetos.”

No you can’t. Two reasons. One, if you aren’t wearing any pants, your laptop will get too hot on your bare legs.

And secondly, orange Cheetos dust will get all over your fingers and it’ll muck up the trackpad on the laptop.

Otherwise, I agree with everything you said.
11
RateLadder Says:
August 9th, 2007 at 3:10 am
I have been using etrade since ‘99… Never looked back. The only way to go.
12
David Says:
August 13th, 2007 at 2:23 pm
One thing online banks can’t offer that is usually a good thing to have: a safe deposit box.

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