Wisely Consider Online Banking

In my last post, I discussed wisely selecting a savings account. Today I’d like to share a growing trend in personal finance, online banking.

Why is online banking becoming a popular option?

Online banks generally offer higher rates and lower expenses when compared to conventional branch banks.

The reason: Online banks live in cyberspace, which means no need for physical locations, unlike their branch bank counterparts. Online banks save millions of dollars each year just because they don’t have a physical location.

The bottom line: Fewer expenses for the bank translates into better rates and lower fees for you, the consumer!

So what’s the best online bank?

To provide a definite answer, I’d have to analyze your financial records and hear your short and long term financial goals. Since that’s not possible, I’ll share with you two of the most popular and highest-rated online banks.

 ING Bank is one of the highest rated consumer banks, according to FindTheBest, with a Smart Rating of 85. The bank supports 35,000 ATMs with only one branch (its corporate headquarters).

• Checking: The Electric Orange checking account boasts an APY of .2 percent (105.9% higher than the average) and requires no minimum balance, making it a great option to consider. However, other checking accounts offer higher APYs. If you’re looking to gain a higher return, consider other checking accounts.

• Savings: ING offers two standard savings accounts: Orange Savings and Kids Savings. Both of these accounts offer a .85 percent APY and require no minimum balance. If you recall my last post then you know that 1 percent is the industry high. At .85 percent you can expect a competitive return on your investment with an ING savings account.

 Ally Bank is another popular online bank, though it is not rated by the conventional sources (i.e. JD Power, Moody, MSN Money, etc.). Nevertheless, its savings and checking account are some of the most attractive on the market.

• Checking: Ally’s standard checking account APY is .5 percent (.3% higher than ING). They don’t require a minimum balance but charge an overdraft fee of 9$, which is 70.3 percent lower than all the checking accounts according to FindTheBest’s database. Other features included online bill pay, account alert, and free checks.

• Savings: Ally offers two fantastic savings accounts, both of which carry an APY of .89 percent. Unlike ING, Ally’s saving accounts require no minimum balance. Though a difference of .04 percent APY may not seem like a significant amount in a savings account, a compounding interest rate of .04 percent can return a hearty amount of money in the long run. Comparing savings accounts is tricky, but if you start with Ally I promise you’ll be starting with one of the best!

What don’t online banks offer?

Although the better rates and reduced fees make online banks an attractive option, it’s important to consider what you’re giving up when you leave a bank with a physical presence. The loss of a physical location means the loss of people. Unlike your local bank, where you can go in and chat with a representative face-to-face. with online banking, you’ll need to be content with phone conversations and IM chats. Therefore, if you’re a “people person,” online banking may not be the best fit for your needs.

Furthermore, cyberspace may allow for a great deal of freedom, but it also opens the possibility of hacking. Research the encryption that online banks use and make sure their track record is spotless. The last thing you want is to log on and see straight zeros where numerical digits used to live!

Once again, do your research and always be an informed consumer when deciding between any products, especially banks.

Byline: Post provided by Kyle Espinola of FindTheBest, an unbiased data-driven comparison engine designed to help you find the best of anything from a credit union to section 8 housing.