Now that more people are signing up for online savings accounts that pay high interest rates, Web-based banks are going after your checking-account business, too. The banks are offering interest-bearing accounts that beat the rates at traditional banks by a mile.
Interest-bearing accounts exist in the non-Web world, but they're a terrible deal. In 2006, the average yield at a brick-and-mortar bank was 0.34%, compared with 2.25% at an online bank, according to a survey by Bankrate.com. And fees averaged $10.74 each month, compared with just $4.31 online.
FreeNet checking from EverBank comes as close to a traditional checking account as you'll find. The bank sends you a debit card and a checkbook, and reimburses you up to $6 a month for ATM fees. Plus, you earn a yield ranging from 3.41% to 5.01%, depending on your account balance.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The minimum balance is $1,500, and bill-paying is free as long as you maintain that level (drop below it and you'll pay $4.95 a month). Opening an account is easy: Mail in an application and a check to fund the account. You can view your monthly statement online or receive it by mail.
ING Direct's Electric Orange account shakes things up a bit more. For one thing, ING does not send a checkbook; its checks are issued electronically. You enter the payee's information, and ING sends an e-mail directing the payee to a secure site to approve the transfer. You can also fill out the check online for ING to mail the next day.
You get a debit card, but ATM access is tricky. ING is on the Allpoint system, which means the only free ATMs are located in convenience stores and other retailers. Bill-paying is free, and the account has no fees unless you request a special service, such as stopping a payment. You do your banking completely online -- from opening your account to viewing your statement. Interest rates range from 4% to 5.3%, depending on your balance, and there is no required minimum balance.
More options for direct banking are on the way. HSBC Direct and E-Loan say they plan to bring similar accounts to market later this year.
With high yields and low fees, Internet checking accounts are attractive. But they're not for everyone. If you are often paid in cash, for example, online checking isn't for you. And, says Bankrate.com's Greg McBride, an online checking account shouldn't replace your online savings account. "Yields on checking accounts are attractive but still come up short compared with savings accounts."
-
Quiz: How Much Do You Know About How Social Security Benefits Are Taxed?Quiz Social Security benefits often come with confusing IRS tax rules that can trip up financially savvy retirees and near-retirees.
-
Are You Ready for 65? The Medicare Initial Enrollment Period QuizQuiz Turning 65 soon? Test your basic knowledge of Medicare's Initial Enrollment Period (IEP) rules in our quick quiz.
-
3 Ways to Stretch the 2026 Social Security COLA For Your BudgetThree steps retirees can take to stretch the Social Security COLA to fit their budgets.
-
Amazon Resale: Where Amazon Prime Returns Become Your Online BargainsFeature Amazon Resale products may have some imperfections, but that often leads to wildly discounted prices.
-
Roth IRA Contribution Limits for 2026Roth IRAs Roth IRAs allow you to save for retirement with after-tax dollars while you're working, and then withdraw those contributions and earnings tax-free when you retire. Here's a look at 2026 limits and income-based phaseouts.
-
Four Tips for Renting Out Your Home on Airbnbreal estate Here's what you should know before listing your home on Airbnb.
-
Five Ways to a Cheap Last-Minute VacationTravel It is possible to pull off a cheap last-minute vacation. Here are some tips to make it happen.
-
How Much Life Insurance Do You Need?insurance When assessing how much life insurance you need, take a systematic approach instead of relying on rules of thumb.
-
When Does Amazon Prime Day End in October? Everything We Know, Plus the Best Deals on Samsonite, Samsung and MoreAmazon Prime The Amazon Prime Big Deal Days sale ends soon. Here are the key details you need to know, plus some of our favorite deals members can shop before it's over.
-
How to Shop for Life Insurance in 3 Easy Stepsinsurance Shopping for life insurance? You may be able to estimate how much you need online, but that's just the start of your search.
-
Five Ways to Shop for a Low Mortgage RateBecoming a Homeowner Mortgage rates are high this year, but you can still find an affordable loan with these tips.
