Online bank accounts – once a novelty – are now a big part of financial services. According to the latest Comscore.com report, Americans have become increasingly reliant on online banking even as discontent with banks in general remains high.
Accordingly, it's important for bank customers to find the online account that works best for them. This can mean choosing between traditional and online-only banks, or between savings and checking accounts. Which online bank account is the right one depends ultimately on a customer's financial and savings goals.
Online and Mobile Banking with Established Banks
Customers who already do their banking with a traditional, brick-and-mortar institution may not need to go any farther for an online bank account. All major banks, as well as many local banks, have online account management software that can be accessed via a PC or mobile device.
For flexibility and breadth of services, big banks can be the best choice. For example, Bank of America offers many different accounts and has one of the largest number of branches and ATMs in the United States. In recent reports, Keynote Systems, Inc. gives Bank of America the best overall score, while the American Consumer Satisfaction Index and ComScore.com both put Bank of America among the top four or five.
However, the interest rates for savings accounts at traditional banks are negligible, especially in the wake of the 2008 financial crisis.
Online-only Banks: Better Annual Percentage Yields
Online-only banks offer better annual percentage yields (or APY) than traditional banks by having fewer costs and overhead from physical branches – the savings are passed on to their customers.
ING Direct was one of the first, and is still among the most popular, online-only banks. Ally Bank is a newer competitor that (for the moment) offers slightly higher rates of return. Online-only banks sometimes use teaser rates to woo new customers, though.
Online-only banks are also less accessible than conventional banks. Deposits and withdrawals are made via ATMs on a shared network, through the mail, or by electronic transfers to other (traditional) bank accounts. It can take a few business days to move funds, making an online-only account a better choice for customers who need a supplemental account for long-term savings.
The Best Online Bank Accounts for Checking
Online bank accounts used to focus on savings, but online checking accounts have grown in popularity in recent years. Similar to conventional checking accounts, online checking pays lower interest and has greater restrictions or fees.
For those who do many transactions, a high-yield checking account may be the best choice. High-yield accounts currently have APYs nearly double those of online savings accounts. The catch is that there is a high minimum amount of debit or other transactions per month required to get the best rate, and such accounts often have balance caps.
No matter what account is chosen, it is also beneficial to research the reliability of a bank. There are various sources that rate banks. BankRate.com is one of the most widely known, though its quarterly ratings may not reflect the most up-to-date health of a particular bank.
It can be hard for consumers to choose between online banking options. In general, those who need flexibility should use the Internet tools of traditional banks, while those looking for long-term savings may find the best online bank accounts at online-only institutions.
Luke Arnott - Luke Arnott has a Master's Degree in Comparative Literature from the University of Western Ontario, where he is currently enrolled in the ...
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