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Wednesday, April 05, 2006 

Do I Really Need A Brick And Mortar Bank?

Few years back I opened online savings account with ING, I had many doubts at that time including, how easy would it be to transfer money between my regular checking account with local bank and ING, I knew they were FDIC insured but still what if they packed off one day, how long would it take to get my money back. Since those were the dark days of lay offs in Silicon Valley, there was no sure way of knowing when I may need my emergency fund. I would check my account every few days just to make sure money was there ;-) Fortunately I never needed to withdraw that emergency fund, and over a period of time it became the place to park any available cash. Recently I opened another savings account with HSBC Direct, well they are offering better interest rates.

Now all these years I always kept one or more checking account with local brik and mortar banks. But considering how rarely I use anything beyond their ATMs, I am wondering should I just move to totally online banking. Here are some of the things I started to feel like hassles with local bank:
  • Direct deposit or high minimum balance requirement to avoid monthly fees.
  • Currently I use Wells Fargo and they charge a monthly fee for bill pay, unless I agree to maintain minimum $5000.00 in my checking account.
  • They have fees for a number of other "services".
  • ATMs, though one major advantage with a big bank like Wells Fargo is their ATM networks but every now and then I end up driving quite a bit looking for one of their ATMs.
  • They have some random rules for putting holds on checks, recently I got a check from Citibank for refund because of 0% balance transfer and they put a hold for 15 days on it.
Looking at these points I'm thinking should I just go with an online only bank for my checking business too. Here are some basic requirements I have:
  1. ACH transfer capability to/from other banks.
  2. Free Bill Pay.
  3. No minimum balance. Though I always keep some money but prefer not to have any minimum balance requirement.
  4. No ATM charges and also refund fees charged by other banks for using their ATMs.
  5. A simple and free way for making deposits, don't mind mailing checks.
  6. Overall a hassle free dealing, so I don't go looking for customer service :)
Anything beyond this will be just wonderful.

I'm still not sure if online only checking account would be as seamless as savings accounts. So any pitfalls I should be aware of? Second I’m looking for suggestions for a good online bank based on your experiences.

I use bank of internet (http://www.bofi.com). Fits all your criteria except for possibly no min balance. I dont qualify for their accounts meant for folks over a certain age, so have their freedom checking account. $1000 minimum but then they pay around 3.15% interest so its not so bad.

I use everbank (www.everbank.com) they have a great rate that varies depending on the amount you have deposited. The current rate for under $9,999 is 3.01% and there is a 3 month new customer intro rate of 5.51%. They have free bill pay if you maintain a balance of $1500 otherwise its $4.95 a month and ATM fee reimbursement upto $6 a month. The only thing I use a brick and mortar bank for is to deposit cash.

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