Personal encounters that previous generations took for granted have either disappeared entirely, or are getting pretty darn close to extinction. Wherefore the milkman? The telephone company operator? The research librarian? And, with ever-growing frequency, the bank teller…
Online banks have become a reality, in large part because they are so convenient. Ridiculous fees are easy to dodge, too. It’s not unusual for big brick-and-mortar banks to charge $30 or more a month, even if you’re an outstanding customer—even though they’re already making money off of holding your money.
If that makes you mad as hell, it might be time to find an online bank. But how do you choose?
Just recently, GOBankingRates.com released a list of top 10 online banks.
Ally Bank finished first as it offers “no checking account maintenance fee, high savings and CD yields and ample customer service,” along with mobile banking access and 24/7 customer support by phone.
In second came Bank5 Connect, which provides reimbursements up to $15 per month for ATM fees charged by other banks. And in third, Discover Bank has the added bonus of offering mortgages, along with home equity, student and personal loans.
If you aren’t already using an online bank, you probably will soon, so here are seven things you deserve from your cyber-financial institution.
As few fees as possible
A major reason for leaving the big banking world involves pesky fees of all kinds—service fees, monthly fees, ATM fees, overdraft fees, etc.
They’re nearly impossible to escape anymore, so it makes sense that online banks will want to compete by keeping the fees as close to zero as they can. But some may charge for certain services and if you’re absolutely fee adverse, look at whether the bank has minimum deposit requirements or standard fees in the fine print.
Quality customer support
Just because a bank offers 24/7 customer support—and flesh-and-blood reps by phone—doesn’t mean the service is spotless. It’s always a good idea to trawl around a bank’s Facebook page or websites such as Consumerist to get the word on the bank’s track record. That said, access can also affect service because you never know when you’ll need to speak to someone.
Though it finished fourth on the list, GE Capital Bank got there by its high yields, not its user-friendliness. “It doesn’t offer a checking account product, nor 24/7 telephone customer service, live chat with a person or a mobile app.” OK, then: How about a passenger pigeon?
There haven’t been any headline-grabbing hacks of online banks just yet. But it’s happened with bitcoin websites—and in an age when eBay and Target both fell victim to data compromises, it pays to ask how your bank keeps ahead of the hack pack.
Losing money is virtually impossible; online banks have backing from the likes of the FDIC. But having your information exposed and shared is still a possibility. Consider that small business cyber attacks nearly doubled from 2011 to 2013, from 18 percent to 31 percent, according to Damian Caracciolo, vice president at CBIZ, a firm that provides employee benefits and insurance advisory services.
A high BauerFinancial star rating
BauerFinancial is a company that has independently analyzed the performance of U.S. banks and credit unions since 1983. Any online bank that rates lower than a three on the Bauer scale should give you cause for concern.
Even among the quality banks, it may surprise you how the ratings stack up. Though Bank5 Connect offers lower yields than Ally Bank, it gets five out of five stars from BauerFinancial. (Ally, by contrast, received three and a half stars.)
You’d think that every online bank has a smartphone app, but that’s not true. As we’ve seen, around-the-clock customer service and live operators aren’t a given, and the network of ATMs may be small or large.
Depending on which conveniences are most important, shop around to find the bank that best satisfies your list of non-negotiables.
Diversity of products
Much of how you match up with an online bank depends on your primary needs. Don’t assume that an online bank offers checking, and don’t get roped in when a bank brags about having the highest returns on CDs and deposits—because at all banks, those returns are minuscule anyway, and never a smart alternative to investing. You’re looking for a place to park and move your money easily, not to fool yourself into making a “killing” on a 1.15 annual percentage yield.
Ease of account setup
High tech doesn’t equal high-speed setup. With some banks, opening accounts can be easier said than done, according to MyBankTracker:
“Browse the web for reviews of online banks, and chances are you’ll find that a number of customers have written about how unhappy they’ve been with their experiences. More often than not, however, the discontent comes … from the difficulties associated with opening an account in the first place.”
So if you see a flurry of forms and ridiculous requirements barreling your way, turn tail and run to the nearest reasonable online bank. At the best online banks, opening an account is as easy as providing your personal details and the checking and routing numbers of an existing bank account. Done.