| Key Tips for Online Banking Accounts |
| By Credit Federal |
Published
08/6/2007
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Financial Tips
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Virtual Online Banking Account Benefits
If you're like many people, you go to the bank only when you're out and about on other errands or during your lunch hour. And, it seems to never fail, that when you have the least time that's when there are the least amount of tellers and the most customers also waiting in line.
To deal with this problem; and to exploit a golden opportunity, there are banks that offer internet-only, online banking accounts. These virtual banks initially offered only high yield savings accounts, but now offer free ATMs and check writing.
Browsers instead of Branches: Instead of visiting a local branch, you simply visit the bank via the comfort of your home by launching your internet browser.
You'll be joining 41 million households that now do some form of banking online, and that number is expected to nearly double within four years. And, some of the conventional banks are trying to add browser stores in addition to their brick-and-mortar branches.
So which do you choose? A bank that offers both brick-and-mortar branches in your area as well as online access? Or a bank that offers only online banking?
Not surprisingly, virtual, online-only banks can offer higher yields and charge lower fees, because they have less overhead costs. And there's no waiting in line. Here is an overview of the benefits offered by banks that do business only online:
Yields are much higher: Although the Federal Reserve has kept short term rates at 5.25% for more than a year, the yield on most money market accounts remains stubbornly low, on average less than 1%. Not so with virtual banks.
Online banks also tend to keep accounts refreshingly simple: no fees, few minimums, no strings whatsoever. In other words, you make more money and don't have to jump through hoops to hold on to the cash.
Do a few percentage points make a big difference? Over two years, a $10,000 balance at 5% could grow to more than $11,000 online. In that time at the typical branch you'd earn just $200.
A slew of Web banks have also rolled out checking accounts that pay from 1% to 4%, compared with a mere 0.28% on average at conventional banks.
These accounts aren't as carefree as savings (you may have to maintain a minimum balance or sign up for direct deposit in order to earn interest or avoid a monthly fee), but the same holds true for traditional checking accounts.
Bank of America; for example, waives the $12 monthly fee on its regular checking only when you meet its minimum-balance requirements and you don't earn interest. There are always going to be checking account rules and minimums, but why not earn a little extra money for the hassle?
Convenience: The early versions of online banks were great at paying high yields, but getting your money in and out of an account (unless it was via electronic transfer) used to be tricky. Today that obstacle has all but vanished. Online-only checking accounts now come with ATM cards that work in virtually every machine. As for ATM charges; since online-only banks have no branches, most virtual banks reimburse ATM surcharges (typically up to $6 a month). That's a better deal than at most brick-and-mortar banks which rarely give you a refund and/or sometimes levy an additional fee of $1.25 on average for using some other bank's ATM machine.
As for depositing cash into your account, you can either make an electronic transfer, set up direct deposit or mail in checks; and often by using prepaid envelopes.
Equal or better service: Traditional bank customer service is a far cry from being superior. Many traditional banks use automated customer service phone lines which are aggravating and not nearly as equal to an online help section and email support.
Control: Once you're a customer of an old-fashioned bank, there's a likelihood you'll stay with it for a while; direct deposit and automatic payments strengthen the bond, and switching accounts is also not attractive. With online banking you can be a more informed shopper and easily take your savings elsewhere if there's a better deal. You can compare rates and fees from your home computer, and making the switch doesn't require waiting in line.
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