We all try to do our best to maximize the return we get on our money. It has driven an entire subsection of the banking industry to cut costs and offer online savings accounts. The rates the banks offer vary as much as the interfaces they offer for you to manage you accounts. I constantly see reviews, articles, and even rate lists that tout the highest rates as though that is the only thing that matters. I have learned the hard way there is a lot more to an online banking account than just interest rate.
Deposit Holds
One of the things you have probably never thought about when opening an account online. I know I didn’t think about it. I am used to holds on transfers and checks bu when I make a direct deposit transaction I expect it to be direct and immediately available, that isn’t always the case. I have been using iGoBanking’s Online Checking Account for a while now but I am finally wising up and getting the hell out. A portion of my paycheck is direct deposited on Mondays, they hold it for three days so I don’t have access to it until Thursday/Friday. This is unacceptable for a checking account. In my savings it doesn’t matter but checking I “need” that cash. Check before you open an account and make sure they don’t hold your direct deposits.
Transfer Limits
Most online accounts limit the amount you can transfer at one time, and the amount you can transfer in any given day or month. These limits don’t mean a lot to people like me who don’t have a ton of cash but when you are looking at $50k+ in an account you have to be prepared for the reality that you may not be able to get all that money in just a couple of days. Check with your bank and make sure you know what their limitations are on transfers.
ATM Fees
When you are looking for an online checking account ATM locations and fees are far more important than the interest rate. When you are making 2% or less on a minimal average balance the ATM fees you pay will murder any chance you had at earning interest. Most banks are only members of a specific ATM network which you can use surcharge free, anywhere else you have to pay. You should check and make sure the ATM’s are convenient to where you live, work or play. Otherwise you are better off sacrificing interest rates for an easier to access ATM. These ATM fees are another thing that has killed me with my current online checking account.
User Interface
While not directly related to your interest earnings the user interface makes a big difference in how you interact with your online account. A well designed interface makes you feel like you are dealing with a professional bank who care about your experience. Not only does it increase your confidence in the bank it also allows you to more easily manage your money. The bad part about interfaces is you don’t really know until you open the account. To get a little more insight you can look to reviews for more details.
Customer Service
Finally customer service is important when you need some help you want to know you can get it easily. One of the areas online banks cut costs is on their customer service availability. They either aren’t available, or they aren’t easily accessed. It makes it difficult to get the answers you need and can make a big difference in your experience with a bank.
What other things should you look for in your next bank account?
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Customer service is a big one for me.
A majority of my savings is online, but I still continue to go to a local bank because of their customer service. Even though I know I can get better rates somewhere else.
The only other thing I would add is stability. I’m not a huge fan of newer banks or banks that are just entering a new market like online banking.
Stability is definitely important. One of the first online savings accounts I opened was with a startup online bank called On Bank. They had super high rates when they first started out, now their rates are something like .50%.
For me, checking and savings accounts are in completely separate categories.
For checking accounts, I need ATMs that are easily accessible, that have no fees, and are easy to use online.
For savings accounts, I usually look for the highest rate but that lets me transfer money freely. I don’t go rate hunting, but as long as it’s in the top tier, I’m ok.
I hate Bank of America, but it’s so damn convenient that I keep it. I hope that one day I’ll leave them.
ING is my primary checking account, where I get my paychecks deposited to and where I transfer money and pay bills. Everything flows through it and if they had more ATMS in my area, they would be my only checking account.
SmartyPig is where I have my savings accounts. I don’t touch that money.
Similar to transfer limits, an online bank’s transfer features are important. Some internet banks require you to mail in a voided check to create a link to an external account. I much prefer the trial deposit method. Transfer speed is another important feature.
For me, the deciding factor in choosing who to bank with is the customer service and the quality of assistance offered by staff. Most of the other factors; fees, limits etc, don’t tend to vary much from one bank to the next. Customer service, on the other hand, varies drastically. I’m tempted to drop some names of the worst performers, but I’d rather just let them fade into oblivion.
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