Which online bank is best? This is not an easy question to answer since we all have different criteria when it comes to banking. A good place to start is how much interest the bank is paying you. However, there are many more factors to consider beyond interest rate.
7 Things To Consider Before You Open An Online Bank Account
To make sure you have the best possible bank for your need, be sure to look for the following features:
Low or No Fees
There are enough banks out there that you should not have to pay any fee. Before you open an account, ask for their fee schedule. Some of the common fees to look for include: below minimum account balance fee, overdraft fee (for checking accounts), ATM fee, inactivity fee, and transfer fee.
Good Web Interface
Online banking should be fast, easy, and secure. First and foremost, the site should be secure with strong validation process and data encryption. Secondly, the site should be intuitive and easy to navigate. Also, it should provide essential features, such as images of your cashed checks, balance transfer tool, a good set of reports (including payments, transfers and deposits).
Other good to have features include alerts (see below), archive of account monthly statements, archive of yearly tax statements, and budgeting and financial planning tools.
Easy Fund Transfers
Transferring money to your online bank account from other banks and brokerages should be easy and free. Setting up direct deposit for your account should be straightforward. And transfers between checking and savings accounts should be easily accomplished.
Breadth of Products
At the very least your bank should have both savings and checking products — even if checking doesn’t pay interest. Access to certificates of deposit would be a nice touch, but not essential. And integrated account management would be icing on the cake.
Online Bill Payments and Electronic Funds Transfer
Electronic Funds Transfer (EFT) is an essential feature nowadays. Make sure your online bank accommodates this free of charge. And it would be even better if your bank let you set up automatic deductions to make scheduled payments for various monthly bills.
E-mail Alerts and Reminders
In today’s fast moving world, alerts and reminders are must haves. Your online bank should let you set up email alerts, such as, low balance alert, large withdrawal alert, and excessive activities alert.
Regardless of what your online bank does or doesn’t have, it should have good customer service. There should be a toll-free number that you can call 24/7 — in addition to other methods of contact.
What bank are you using today and how does it compare to this list? Also, did I leave out any feature of a good online bank?
Pinyo Bhulipongsanon is the owner of Moolanomy Personal Finance and a Realtor® licensed in Virginia and Maryland. Over the past 20 years, Pinyo has enjoyed a diverse career as an investor, entrepreneur, business executive, educator, financial literacy author, and Realtor®.
I hear a lot of great things about online savings account but the rates are real low right now, is it even worth it? I have money in my banks money market account and the rates are basically identical now and it’s more liquid. Is it really worth transferring it over to an online bank?
I’m with ING and the interest rate is higher then with my traditional bank. I consider the funds invested with ING liquid because I have my traditional bank account link to my ING account.
When considering ING, I did look for all the above points. I happy with them.
Great advice on what to look for before opening an account – especially the part about understanding the fees associated with the account. @Craig and @ Yvette: While many people seek a checking account that offers a high interest rate, there are other options you may want to consider. Specifically, a checking account that gives you rewards for using the account (not just parking money there). I work for PerkStreet Financial and next month we’ll be introducing the first checking account to give you 1% cash back or other rewards such as free coffee and music. There’s no maintenance fee… Read more »