Jessica Jinkens: Online Banking: 13 Choices for Higher Interest Rates and Increased Security

In its July 2009 issue, Consumer Reports Money Adviser published a brief overview of the best online banking options according to their research. “Online banking, despite a rocky start, is becoming the rule rather than the exception,” the article says, noting that online banking can net savers better interest rates and increased security.

I’d love to be able to point you to an online version of this article, but none exists. And I’m not about to reproduce large chunks of the text here. (Consumer Reports doesn’t like that.) But I can highlight their main points about online banking, as well as list the results of my own research into online banks.

Some of the article’s main points:

Traditional banks that have moved into online banking (such as Bank of America and Wells Fargo) generally offer lower rates and impose higher fees than established online banks like ING Direct and HSBC Direct.
If you’re worried about bank failures, remember that the FDIC currently insures deposits of up to $250,000. (This limit has been extended through the end of 2013.) You can research the financial safety of online banks (and traditional institutions) using BauerFinancial’s bank safety ratings.
The biggest thing that holds people back from online banking is concern over security. Via Twitter yesterday, @thenonconsumer told me, “My husband is very skeptical about using an online bank like ING Direct for savings.” He’s not alone. But according to Consumer Reports Money Adviser, online banking can be safer than traditional methods because there’s less of a paper trail, and your transactions are digitally encrypted.

Here’s a list of online banking options I compiled in four hours of research yesterday. I haven’t tried to be comprehensive here (a comprehensive list would be huge), but have based my research on my own interests and the requests of my Twitter followers. I’ve made no attempt to rank these banks. They are listed in alphabetical order. Rates are annual percentage yields. All accounts are FDIC insured.

Savings	12-month CD	Money market	Bill-pay

2.05%	2.35%	1.85%	—
Notes: No fees, no minimums. Money-market account appears to act as a checking account and has no ATM fee. Ally Bank is the newly-renamed GMAC Bank.

Savings	12-month CD	Money market	Bill-pay

1.75%	0.50%	1.40%	Free
Notes: No fees. Savings rate is 1.01% for balances below $10,000. $5000 minimum balance for certificate of deposit. No minimum for money-market account, which includes an ATM card. Capital One does not charge for ATM withdrawals or balance inquiries, but the owner of the ATM may.

Savings	12-month CD	Checking	Bill-pay

1.35%	1.25%	0.75%	Free
Notes: No fees, no minimums. ($1000 minimum for certificate of deposit.) Charles Schwab is a discount broker, but also offers banking services. Checking has no ATM fees.

Savings	12-month CD	Checking	Bill-pay

1.40%	1.70%	1.50%	Free
Notes: $500 minimum for certificate of deposit. No fees, $100 minimum for savings and checking. Checking is actually “ultimate money” account and may require a second account. To earn the 1.50% “ultimate money” rate, you must make at least two online bill payments each month. ATM access for checking.

Savings	16-month CD	Checking	Bill-pay

2.00%	2.25%	—	—
Notes: No fees, no minimums. ($1000 minimum for certificate of deposit.) No ATM. Sibling to Emigrant Direct.

Savings	12-month CD	Checking	Bill-pay

1.55%	2.00%	—	—
Notes: No fees, no minimums. ($1000 minimum for certificate of deposit.) No ATM. Sibling to Dollar Savings Direct.

Savings	12-month CD	Checking	Bill-pay

0.95%	0.70%	0.40%	Free
Notes: No fees, no minimums on savings. $1,000 minimum for certificate of deposit. Checking has minimum balance of $5,000, else rate is 0.05%. No ATM fees (and ATM card appears to be available for savings as well as checking).

Money market	12-month CD	Checking	Bill-pay

3.01%	2.00%	3.01%	Free-ish
Notes: $1500 minimum to open accounts. Low-balance fees may apply. Money-market APY is a 3-month promotional rate, after which APY drops to 2.00% (with conditions!) for the rest of the first year; it’s fixed at 1.65% after that. Checking APY is a 3-month promotional rate, after which APY drops to 1.96% for the rest of the first year; it’s variable (1.02% - 1.65%) based on account balance after that. Online Bill-Pay costs $8.95 per month if you do not maintain a $5,000 balance in checking. Checking has no ATM fees.

Savings	12-month CD	Checking	Bill-pay

1.65%	1.50%	1.25%	Free
Notes: No fees, no minimums. No ATM. Checking is actually a “Direct Billpay” account. The FNBO site used to be more informative; I had trouble finding the data I needed for this article and, in fact, had to rely on reader comments to fill in gaps.

Savings	12-month CD	Checking	Bill-pay

1.55%	2.00%	1.00%	Free
Notes: No fees, no minimums. ($10 minimum for certificate of deposit.) No ATM fees for checking. ATM available for savings, but I can’t determine fee structure.

Savings	12-month CD	Checking	Bill-pay

1.50%	1.50%	0.25% to 1.65%	Free
Notes: Easy to set up multiple accounts. No fees, no minimums. Checking allows ATM access.

Savings	12-month CD	Checking	Bill-pay

0.75% - 1.77%	0.75%	0.50% - 1.51%	Free-ish
Notes: No fees or minimums for savings account. $10,000 minimum for certificate of deposit. $500 minimum for checking. Free bill pay for 90 days. Free bill pay if you maintain an average $10,000 balance in checking. ATM card available on some accounts.

Savings	12-month CD	Checking	Bill-pay

1.87%	1.51%	—	—
Notes: $100 minimim to open savings, $1000 minimum to obtain rate. $1000 minimum for certificate of deposit. “Nationwide network of surcharge-free ATMs”, which seems vague.

To compile this list, I pulled information directly from bank websites on 15 June 2009. I also used the tools at Money Rates to fill in gaps. Note that many of the checking accounts above are simply online bill-pay accounts — you can’t use paper checks with them. Please let me know if you spot errors.

The Consumer Reports Money Adviser article about online banking included a handful of brick-and-mortar institutions. My list leaves most of them out. I visited every website that CR mentioned, but I have to say, a lot of traditional banks have terrible web presences. Bank of America? Wells Fargo? Chase? Good luck trying to figure out how online banking with any of them or what rates you’ll receive. They’re still marketing to the pre-Internet generation.

For more info, you may want to visit Money Rates or check out some previous GRS articles about online banking:

Here’s the ever-popular Get Rich Slowly list of money market and high-yield savings accounts.
Don’t forget that certificates of deposit are a great way to put your savings on steroids. Here’s my list of current CD rates.
Finally, be sure that you’re making the most of your checking account. In many places, a rewards checking account actually offers better interest rates than any other option.

One final note: The Money Adviser article emphasizes that rates are low right now. It might seem silly to worry about the difference between 1.50% and 1.65%, but eventually rates will rise and there will be more differentiation between online banks.

If you have thoughts about any of these online banks (or about online banking in general), please leave a comment.

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