Money-Rates.com guide to Online Bank Checking Accounts
October 08, 2008
MONEY-RATES.COM GUIDE TO ONLINE CHECKING
A leading source of information on bank rates, finance, and investing since 1999, Money-rates.com has been profiled in the Wall Street Journal, Barron's, USA Today, Newsweek, and U.S. New and World Report as a valuable resource for individual investors. Here is our guide to online checking:
(1) Basics of APY
The higher rates promoted by online banks are very often promotional and accompanied with deposit requirements. Read carefully the disclosures before assuming that the advertised rate will apply to your new checking account.
(2) The Magic letters: FDIC
Mutual funds, brokerage firms, and private companies all offer products with check-writing features but are not FDIC-insured. In addition, there are offshore banks soliciting depositors with enticing rates. FDIC insurance which is backed by the U.S. government gives depositors the highest level of safety achievable. Verify that any new bank you are considering opening an account at is a FDIC-member institution by visiting www.fdic.gov
(3) Features of Online Checking
Without any question the number one advantage of online banks is that they offer higher rates and lower fees. But besides this obvious and profitable benefit online banks can make depositors life easier with their sophisticated online bill payment options, ability to link several bank accounts, ability to link mortgage and home equity loan products, ability to link checking and brokerage accounts (in some cases), compability with accounting and financial software, and superior web platforms.
(4) Downside of Online Checking
The obvious drawback of an online checking accout is that you do not have a brick-and-mortar bank to drive to for deposits and withdrawals. While most online bankers use direct deposit, deposit-by-mail, or even maintain a small local checking account one should always remember that online banks lack the immediacy of deposits and withdrawals that local banks offer.
(5) Negotiate
Many banks will match the features and in some cases the yield of another bank rather than lose the business. Ask a customer service rep if they can match an offer of another bank.
