Credit & Money Management
Top ten E-Banks
Ease of use. More features. Better security. And most have branches, too.
By Jeff Bertolucci, Contributing Writer
From Kiplinger's Personal Finance magazine, November 2005
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Of course, mailing a check will increase -- by days -- the time it takes for your check to clear. And, says Online Banking Report publisher Jim Bruene, "People don't like to make deposits at an ATM," particularly one that isn't owned by their bank. When Megacz was living paycheck-to-paycheck two years ago, he'd send checks to First Internet Bank via FedEx or express mail, which, he says, can be a pain.
Another virtual issue: Internet-bank users may pay steep ATM fees for cash withdrawals. That's true particularly if your financial institution does not have teller machines in your area. First Internet Bank eases the pain by refunding up to $6 in ATM fees each month for its interest-checking customers. Although NetBank doesn't refund fees, its 8,000 machines across the U.S. are free to its customers, who can locate the ATMs at the bank's Web site. Downing used the locater to find machines near his home in Canton, Mass.
What about safety?
The main issue consumers have with online banking is security. Banks are working to persuade customers that online banking actually adds to your financial security, says Chris Musto, vice-president of research for Watchfire G—mezPro. That's not an easy sell to consumers who see the elimination of paper statements and returned checks as a savings for the banks, with no benefit for them.
But Musto says eliminating paper is itself a safeguard. Statements can't be lifted from your mailbox or plucked from your trash -- and that's just one way online banking offers increased security. For example, some online banks offer a service that presents your bills on the banking site. By using this feature, you can eliminate credit-card and phone statements sitting exposed in your mailbox. And e-mail alerts from some banks -- such as Wells Fargo and Citibank -- can notify you when large sums have been withdrawn.
You can also check your statement online anytime you wish. Online visits, Musto says, "reduce the impact of an act of fraud." For example, if your credit card or checks were stolen, you might not discover that until your next paper statement arrived in the mail. With online banking, however, you can find unusual account activity much sooner (people check their accounts online five times a month, on average).
Online banking is evolving rapidly. To make sure you get a top performer, see the rankings on page 100 and look for the following features:
No fees. About 80% of online bill-pay accounts in the U.S. are free, according to Online Banking Report's Bruene, and "about half" of those are customers of Bank of America. Many banks offer free bill pay only in limited cases. Wells Fargo, for example, charges $7 per month if your average monthly account balance falls below $5,000. And after three months of inactivity, NetBank levies a $5 monthly fee on accounts of less than $3,000. EverBank charges $5 per month if your monthly balance is less than $1,500. First Internet Bank customers with free checking pay $4.95 a month for online bill pay, but customers with interest checking accounts (who pay $10 a month) get it free, as long as their balance stays above $500.
Good Web tools. Online banking should be simple and quick. A bank's site should be a snap to learn and easy to navigate, and should provide essential features, such as images of your cashed checks and tools for budgeting. Bank sites have come a long way in recent years, and you don't have to pick a big bank to get a good online experience. The best sites also provide recent transaction reports (including payments, transfers and deposits), and warn you of potential security threats, such as e-mails from phishers.
A good bank site provides scanned images -- both the front and back sides -- of your canceled checks. Most major banks offer this service, including every bank on the top-ten list.