Internet banks often have much better interest rates than brick-and-mortar banks. I've been keeping track of the best bank accounts available online; I thought I’d share my picks for the best bank accounts out there, in case they might help other people out.
A word of warning: Interest rates can change at any time. So you should check each bank’s site for the latest information.
Banking online is normally safe, since data is almost always transmitted in encrypted form. The padlock at the bottom of your browser indicates that the Web page you are on is secure (meaning that the data you submit on that page will be transmitted encrypted).
But you are at risk of someone being able to access your accounts if your computer is infected with malicious software such as spyware or keyloggers, or if you compromise your password and other security information by responding to phishing (phishing e-mails or Web sites appear to come from your bank or some other legitimate business and ask you for sensitive information like your password or account numbers, but these are really created by criminals who want to steal your information for financial gain).
Thus, if you do decide to bank online, it's very important that you be vigilant and not fall for the many phishing scams perpretated by criminals to steal your information. You also need to make sure that your computer is not infected with any malicious software like viruses, keyloggers, spyware and other malware.
There are things you can do and procedures you can follow to protect yourself and your information from being stolen and misused. Read the articles I am posting after this for information on what you can do to protect yourself online.
As long as you take precautions to keep your computer and your information secure, you will find that online banking is not only more convenient, it can also be safer. The damage from identity theft is often a lot less for those who check their accounts online, than for people who only find out about the fraud from statements they've received in the mail, because people who use online banking can monitor their accounts more easily and more frequently so they are able to spot any fraudulent transactions and questionable activity much sooner.
Having warned you about the dangers of online banking, here is the information I've collected on the best online bank accounts.
This
thread at
Fatwallet usually has the latest information on the highest interest rates available at banks in the US. The first post is updated regularly to reflect the latest information. This is usually the best place to go if you want to find out the best interest rates currently available. Other good sites you can go to for interest rate information are
Bankrate and
BestCashCow.
ING Direct Orange Savings AccountOne of the standard things that people in the US can do to get a high yield on their savings is to open an
ING Direct Savings account.
ING Direct is an online bank for people in the US that has no physical branches. It has consistently had high interest rates compared to most brick-and-mortar banks. In general, online banks can afford to give higher interest rates on deposits because they have less overhead than banks that have branches. ING is a big international bank based in the Netherlands (I’ve read that it’s the 12th largest bank in the world).
Anyway, here’s a description of the ING Direct Orange Savings Account.
This is a money market savings account, so like all money market accounts, you are only allowed to make a certain number of withdrawals per month. ING lets you make 6 withdrawals out of the account per month, and only 3 by third-party transfers. You get unlimited transfers in, so you can deposit into the account as much as you want.
The account has a pretty high interest rate (3.5% APY). ING used to be a leader in interest rates among online banks. But lately, a number of other online banks have overtaken it, and ING seems to be settling on a rate that’s high, but not the highest. Compared to most brick-and mortar banks though, ING’s rates are still very good.
The account has no fees and no minimum balance (you can keep just $1 in your account). ING works by linking to your existing checking account (up to 3 accounts can be linked). You can make deposits into and withdrawals out of the account through ACH (Automatic Clearing House) transactions. ACH transfers are electronic transfers of funds between banks. These can be initiated online using ING’s Web site. ING tells you to use their site to move your funds back and forth from your ING account to your linked checking account. It usually takes 2–3 business days to move your money into or out of ING.
You can also deposit checks by mail into your ING account, but there are restrictions on what can be mailed in.
ING prefers that you use their Web site to transfer funds between your accounts. But I recently found out that ING will also accept ACH transfers initiated from other sites, even if they don’t “officially” say this. So, say, you want to pay your credit card bill using your credit card company’s Web site, you can initiate a payment on your credit card company’s site to take out the money from ING.
ING also lets you open multiple accounts very easily. Say, you want to have one account to save for a vacation, another account for emergencies, another account for taxes. With ING, you can easily open separate “sub-accounts” for each purpose, and give those accounts any name you want. This makes it easier to keep track of your savings for different things.
ING also lets you schedule regular deposits/withdrawals from the account to your checking account. This can help you automatically save money every month. Also, if your existing bank’s checking account requires direct deposit in order to avoid fees, a regularly scheduled transfer from ING to your checking account can satisfy the direct deposit requirement of your existing bank. Some banks where ING ACH deposits have successfully been counted as direct deposits are Bank of America and Citibank; this won’t work with Presidential Bank though.
If you decide to open an ING Direct account, take advantage of the $25 referral bonus for new customers. If an existing customer refers you, ING will send you a link that will give you $25 for opening a new account, and the person who refers you will get $10. You can e-mail me if you want a referral.
Having said that, there are a few other bank accounts that you may want to consider, instead of ING, because of their other benefits. Here are the other options that I think are the best, based on my extensive research on the subject:
Presidential Bank Internet Checking PlusPresidential Bank has consistently had among the highest rates in the US for the past few years. Their Internet Checking Plus account’s interest rate is higher than ING’s (currently at 4.0% APY on balances up to $25,000).
This checking account requires a $1000 minimum balance and at least a $200 monthly direct deposit from a payroll, annuity, or pension account.
This is a checking account. So you can write checks from your account and not worry about any limits on the number of transactions—the way you would with savings accounts. You can make ATM withdrawals at other banks, and Presidential won’t charge you for them, but it won’t reimburse you for fees charged by other banks for withdrawing at their ATMS.
Presidential also has free online bill pay. Presidential’s Web site doesn’t look nice (unlike ING which has a slick Web site), but it works fine, people say, even though it looks like it was made by teenagers.
This seems to be a good account if you just want one account for all your needs, because it’s a checking account that has a great interest rate.
The drawback is this account doesn’t do ACH transfers so it is harder to access your funds and move your money to/from other accounts. If you deposit your pay check by direct deposit into the account then you won’t have to worry too much about making deposits. Otherwise, you can mail in check deposits. And you can still make withdrawals by check or by withdrawing cash from Washington Mutual ATMs (since Washington Mutual doesn’t charge you fees for withdrawing from other bank accounts at its ATMs).
Of course, if you have another bank that does ACH transfers, then you can link it your Presidential account, and just move your funds using the other bank.
Presidential also has a Premier Savings account that pays even more interest (4.12% APY on balances of up to $35,000), but this savings account has a high minimum ($5000), and you would pretty much need to open a Presidential checking account to have access to your funds.
Emigrant Direct American Dream Savings AccountEmigrant Bank is a 100-year old bank based in New York City. Last year they decided to start a completely online bank called
Emigrant Direct.
Emigrant Direct is a copy cat of the ING Direct model. It has no fees and no minimums. The savings account links to your existing checking account (you can link it to two checking accounts at most), and you can move your money into and out of the account exclusively using its Web site.
Emigrant’s interest rate has been higher than ING’s for the past year. Among accounts with no minimum balance, Emigrant Direct has the highest interest rate at 4.0% APY. The drawback is that Emigrant seems to be stricter than ING. You can’t mail in deposits at all, or initiate ACH transfers from other sites. The only way to move your money into or out of the account is through Emigrant’s Web site.
You’re only supposed to be able to link up to two checking accounts to Emigrant Direct. But there is one way that you can link your ING Direct savings account to Emigrant, if you already have an ING account: When you open your new account at Emigrant, use your ING Direct account as the funding source of the new account by putting in the ING routing number and your ING account number. This automatically makes your ING account one of your linked accounts to Emigrant. Some people do this so they can easily move their money to whichever of the two banks has a higher interest rate, and it seems that Emigrant has consistently had a higher rate than ING for some time now. Then, they just leave a minimal amount in the lower-interest rate account to keep it open in case the interest rate gets better in the future.
I heard that Emigrant’s Web site works fine, even if it is not as nice-looking as ING’s. Some people seemed to have experienced problems with opening their account initially (took a long time since they had to do things by mail), but after that, everything was fine. If you care about the difference in interest rates (currently 0.5%), then that might be a good reason to bank with Emigrant instead of ING.
Emigrant Direct has sporadically had account opening bonuses in the past, so you might want to check if there's one at the time you open your account. There aren’t any promotions currently running, to my knowledge.
GMAC Bank Insured Savings/Money Market AccountGMAC Bank has a money market account with an interest rate that is usually higher than ING ‘s (right now it’s 4.0% APY). There is a minimum balance of $500. The benefits of this account are: You get check-writing with this money market account, and you get an ATM/check card that lets you withdraw up to $500 daily at any ATM for free. GMAC Bank will also reimburse you for ATM fees charged by other banks’ ATMs (up to four a month, maximum of $1.50 each). Plus, GMAC lets you do ACH transfers to and from your accounts at other banks (up to 6) on their Web site. This is a very convenient feature because you can move your money into and out of your other accounts easily online. Of course being a money market account, you can only make 6 transfers out a month from this account, with no more than 3 by check or POS (point-of-sale transactions using your check card). You can, however, make unlimited ATM withdrawals, with a limit of $500 per day. You can make deposits into the account by ACH transfer, or by mailing in checks.
This bank is supposed to have good customer service and a good Web site. You can see this Fatwallet
thread about GMAC Bank.
USAA Federal Savings Bank Checking AccountUSAA is an insurance company that also has a bank. USAA was put up by military officers, and was designed to serve the military, but its banking services are open to the public. You just have to call USAA up at 1–800–531–2265 to get a membership number to view the
USAA Web site, or to open a USAA bank account.
This is a really good bank according to many people. People say that USAA has the best customer service among banks. USAA doesn’t charge you fees at every turn, like a lot of other banks do, and USAA seems to really care about its members.
Interest rates are not the reason that people insist on banking with USAA. The interest rate on a USAA savings account is tiered, and ranges from 2.0%–3.05%—good enough, but nothing spectacular. Yet a lot of people still choose to keep their money at USAA because of the great customer service. And USAA's free checking account is unparalleled.
Since USAA serves the military, it is used to dealing with people stationed all over the world. Thus, USAA has only one branch in San Antonio, Texas, and was designed to handle all transactions remotely by mail, phone or through the Internet. You can even call USAA up from other countries toll-free. So this is a good account for people who know they will be going to, or living in, another country.
There’s really no reason not to get this free checking account because of all the great features it has.
The checking account has no minimums. You are allowed to make 10 free withdrawals at any ATM worldwide per month, and USAA will automatically reimburse you for ATM fees charged by other banks (up to $15 a month, maximum of $1.50 for each withdrawal). The default limit for ATM withdrawals is $400 per day, but you can call them up to change the limit to whatever you want, subject to their approval.
The limit for POS transactions with your debit card is $2000 per day. USAA will also rebate you 0.5% of purchases that you make using their debit card when it is used at stores as a credit transaction by signing (not PIN-based transactions). You can also link your accounts at other banks (as many as you want) to your USAA account, so that you can move your money electronically into and out of your USAA account using the USAA Web site. ACH transfers on USAA are very fast, according to people. As long as you don’t abuse your USAA account by using it only to transfer money between other accounts, then you should have no problems.
If you want to deposit or withdraw money, you can do it by dealing with your local bank, and then using ACH transfers to move money into or out of USAA. You can also mail in check deposits by using USAA’s free postage-paid envelopes. USAA also gives you free checks for life. The account also comes with free online bill pay which even deducts the payment from your account only on the day of the actual debit. The account also has free overdraft protection from your USAA savings account or USAA credit card. If you have more than $1000 in your checking account, you will also earn 0.15% in interest.
You can see this
thread on Fatwallet for even more information about the USAA checking account.
This seems to be the ultimate free checking account.
I have also read good things about the USAA MasterCard credit card, which
doesn’t charge any extra surcharges when used abroad, and even has fee-free cash advances that are charged at a reasonable rate.
