by Meghan Streit ~
How did you choose the bank where you keep your checking and savings accounts? Did you simply open accounts at the branch closest to your home or office? Or default to the major bank most popular among your friends or family?
If so, you might want to consider your options—including online-only banks, which have become popular in recent years. The thought of keeping your cash in a “virtual” bank might seem strange at first. But when you consider that online checking accounts cost 47% less than traditional versions, and online savings accounts pay an average of 457% more interest, according to WalletHub’s most recent Banking Landscape Survey (wallethub.com/best-online-checking-account), online banks start to seem very attractive.
Dock Treece (fitsmallbusiness.com), a financial columnist and former investment advisory rep, says the higher interest rates offered by online banks may be particularly attractive to retirees because interest rates have remained low for an extended period of time. Of course, you wouldn’t want to move your money to an online-only bank unless you’re comfortable with technology.
What’s your comfort level?
“For people who aren’t used to relying exclusively on technology, it can be comforting to have a bank branch nearby where you can get questions answered as they arise,” Treece says. “If you work with an online bank, the only way to address these issues is by calling a 1-800 number.”
Jack Serfas (owrsfirm.com), a Baltimore-based financial strategist, says to make sure the online-only bank you choose—and your deposits—are covered by FDIC insurance. And if you decide to move to a virtual account, don’t forget your automatic deposits and payments.
“When making a full switch to online-only banking, I recommend that you pull up accounts side-by-side as you switch to establish the same online bill pays and to ensure that nothing was left or forgotten,” he says.
So which online bank is the best?
Of course, that depends on what you’re looking for. WalletHub highlighted seven online checking accounts as their editors’ top picks. They ranked Aspiration Summit Account as the best overall, with an annual percentage yield (APY) up to 1%. The account with the highest APY was Consumers Credit Union Free Rewards Checking, which offers an APY up to 4.59%. They selected PNC Bank Virtual Wallet as the account with the best money management tools and Bank5 Connect High-Interest Checking Account as offering the best debit card rewards.
WalletHub offers a word of caution: While most online checking accounts don’t charge fees for online services, you may end up paying for things like teller assistance or paper checks.
“So try to review an account’s terms—focus on every place a dollar sign is listed—in order to avoid costly surprises,” the site advises.
Treece recommends Everbank, which he says began as a brick-and-mortar bank and still has some branches in Florida. Everbank was recently purchased by financial services giant TIAA.
“The interest that their subsidiary Everbank pays on online accounts is excellent—up to 1.5% on very liquid money market accounts the last I checked,” Treece says. “They don’t maintain ATMs, but they reimburse for all ATM charges nationwide.”