Online banking – how to choose one

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Banking online is the financial management system of the future for individuals and businesses: millions of people are using it already. It’s very convenient – no waiting in line. Customers can access their money, pay their bills, and balance their budget all from the security and comfort of their home or office.  Online banking has definitely changed the world of personal finance management.

What are the criteria to look for when deciding between the many online banks? There are now so many different banks out there, such as from which to choose.  Selecting an online bank is a serious decision and one that should not be taken lightly.  When it comes to your financial future and security, every avenue should be examined.

The benefits of online banking

One of the obvious benefits of online banking is the convenience.  With direct deposit of paychecks and online bill pay for most companies, the days of going to the bank to make a deposit are gone.  However, that’s not the only good thing about online banking.  Most online savings accounts actually earn a higher interest rate than those at brick-and-mortar banks.  Additionally, most consumers can open online banking accounts with very little start-up capital and low minimum deposits.  To top it off, many have no annual fees.

Higher interest rates and lower fees are great benefits, but that doesn’t mean that consumers should jump into any online banking offer that comes their way.  It is important to read the fine print and choose your online bank carefully.  Remember, not all alternative banks are created equal, so consumers should be vigilant in their decision-making process.

What consumers need from an online bank

Before committing to an online bank, consumers should first consider what they need the bank to do for them.  It is important that consumers consider their personal financial situation and think about what would work best for them.  Here are some of the most important questions to ask and why.

Is there online bill pay?

An online bank account isn’t worth much attention if it doesn’t offer online bill pay.  Online bill pay allows customers to pay their bills directly from their checking account, without having to write and mail a check.

Is there overdraft protection?

While the overdraft protection feature is not a deal-breaker, it is a nice feature to have and may make one online account more attractive than another.  Overdraft protection allows consumers to link two accounts to prevent bouncing a check or payment.

How are deposits made?

Some online banks require an ACH or electronic deposit from one account to another while others allow customers to mail in deposits.  The more variety in ways to get a deposit finalized, the better.  However, consumers should always ask about the bank’s internal deposit-processing period, as some online banks have a significant wait time.

What is the interest rate?

It is a good idea to be aware of the APY on any online bank account that will accrue interest.  If a consumer’s money is going to earn interest while sitting in the bank, it’s sensible to go for the best rate.

What types of fees are involved?

Some online banks charge fees for minimum balances, deposits, withdrawals, and other services, while others do not.  Unfortunately, some online banks hide these fees and consumers get a nasty surprise when they open their first statement.

Be Informed

Consumers should do their homework when choosing a bank.  The first thing to make sure of is that the bank is FDIC insured, which protects consumers should the bank go out of business or be taken over by another entity.  The reputation of the bank is also important.  Customers should check consumer watchdog websites to see if the bank is known for any complaints, fraud, or problems.  Once a suitable bank is found, consumers will typically enjoy the ease and convenience that online banking will afford them.

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