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Leaving Your Big Bank and Choosing an Internet Checking Account

POSTED ON BY

The recent news of debit cards fees from banks like Bank of America have become the last straw for many people. The news media is reporting on people ditching their big banks. The Move Your Money Project has been around for almost two years, but many more people now seem to be taking notice. The latest popular movement is Bank Transfer Day. It's advocating that everyone move their money from the big banks to credit unions on November 5th. Last week I described how you can find the best local credit unions that offer the best checking accounts. Another option is to choose an internet bank. Even if you want a local credit union, there are still reasons to choose an internet bank. I reviewed this two bank strategy last year.

If you're looking for a new checking account, don't forget to consider internet banks. I've listed several ones below that have free checking accounts. These accounts have no minimum balance requirements and no monthly service charges. Also, all of these have free debit cards with no monthly fees. I divided checking accounts into three categories:

High-Interest Rates without Hassles

Most interest checking accounts at brick-and-mortar banks are not good choices. The interest rate is very low and they usually have minimum balance requirements to avoid monthly fees. That's also true at some internet banks. However, there are some internet banks which offer free interest checking accounts. Here are ones which currently have the best rates. Please refer to our interest checking rate table for the latest rates.

  • ING Direct Electric Orange is only a good deal for those with large balances of at least $50K. The best rate requires a $100K balance. The rate is low for balances under $50K, but it has several nice internet bank features. They recently added paper checks, but these are not free and you can only order them from ING Direct. To avoid ATM fees you'll have to use the Allpoint network.
  • Incredible Bank checking account has offered rates even higher than most internet savings account rates since it was launched almost two years ago. In addition to a high rate, it offers automatic reimbursements of ATM fees. One downside is that you can't use paper checks. You'll have to use their free online bill pay to write checks.
  • Alliant Credit Union High Rate Checking requires direct deposit and e-statements to qualify for the high rate. The first box of checks is free, and to avoid ATM fees you'll have to use an ATM in one of their networks.
  • Ally Bank Interest Checking requires a balance of $15K to qualify for a competitive rate. It has several perks like free paper checks and reimbursements of ATM fees.
  • Capital One Bank Interest Online Checking account may not be a long-term rate leader, but it currently has a nice promo in which they're guaranteeing a competitive rate for one year. The first order of 50 checks is free, and Capital One reimburses other bank ATM fees (up to $25 per month).

High-Interest Rates with Hassles

If you want your checking interest rate to be as high as possible and you don't mind debit card usage requirements, high-interest reward checking accounts are still a good deal. Most of these accounts are offered by community banks and credit unions. The best rates are local deals. However, if you can't find any that are available in your area, there are nationally available reward checking accounts that have higher rates than internet savings accounts. Here are two noteworthy ones that can be easily opened online. Refer to our reward checking rate table for the latest rates:

  • Community Bank of Raymore and Pleasant Hill offer a high-yield reward checking account that pays a top rate for a balance up to $25K. It's a classic reward checking account that has a monthly requirement of 10 debit card purchases and direct deposit (or automatic payment) to qualify for the high rate and free ATMs. There are a few nationally available ones that have slightly higher rates, but I chose these two since they provide an online application.
  • Bank of Internet USA recently started its Rewards Checking account. The rate isn't much better than internet savings account rates, but unlike other reward checking accounts, there's no balance cap.

Low or No-Interest But with Perks

If you don't plan to keep much money in your checking account, the interest rate may not be a priority for you. Other features may be more important. Below are some banks with free internet checking accounts that offer several nice perks other than high interest rates.

  • Charles Schwab Bank High Yield Investor Checking may seem like it should be in the first category. It used to qualify, but its interest rate has fallen too low. Nevertheless, it has several nice features such as unlimited rebates from any ATM worldwide and free checks. A Schwab One brokerage account is required.
  • USAA Bank Free Checking also has a very low interest rate, but it has several nice features such as ATM fee refunds, free checks and mobile banking.
  • UFB Direct (Bank of Internet) offers Airline Reward Checking in which you can earn airline miles for your debit card usage. The account offers unlimited ATM reimbursements, and the first order of paper checks is free. Another perk is free MyDeposits which allows you to deposit checks online with your home PC and scanner.
  • PerkStreet Financial offers a checking account with a cash-back debit card. If you like credit card cash-back rewards but you prefer a debit card, this checking account is a good one. Note, it's not exactly a free checking account. It requires monthly usage to avoid a monthly fee, but it has no minimum balance requirement. The first book of checks is free. To avoid ATM fees you'll have to use the STARsf network.

What's your favorite checking account? And what features are most important to you?

To review more checking accounts, please refer to our interest checking account table, reward checking account table and our business checking account table.

Edit 10/14/2011: Added UFB Direct's Airline Reward Checking


  Tags: checking account, ING DIRECT, Ally Bank, PerkStreet Financial

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Comments
14 Comments.
Comment #1 by idbkier (anonymous) posted on
idbkier
ohOMG why are we even talking about a box of checks.....this is stupid.  paper checks are for your grandmother or your mom,   the rest of us have moved on.     and so we need to stop calling them "checking accounts" and start calling them "internet bill pay accounts"

 

 

2
Comment #2 by Anonymous posted on
Anonymous
idbkier: You are mostly correct about the checks, but there are still a number of places that require them. Most of my childrens' school and after-school activities will not take cash/credit and only take personal checks. 

12
Comment #3 by Awesome (anonymous) posted on
Awesome
Anon #2 is clueless.  Banks/credit unions will send a paper check to anybody via online bill pay.

1
Comment #4 by Anonymous posted on
Anonymous
Also most state's licensing agencies (CPA, RN, etc) will only take checks.  No internet payments, credit cards, or cash.

12
Comment #5 by Anonymous posted on
Anonymous
Anon #3 - are you suggesting that when I get a note from my school that says "your child has a field trip in 2 days, if you want them to go please send back a check for $7" I should fire up my internet bill pay and have a check mailed to them?

First of all, it won't arrive in time.

Second of all, the school isn't going to go through the hassle of processing a mail payment for $7 and reconciling who has and hasn't paid. They collect these things in the classroom and the teacher takes them all to the office.

While I largely agree that paper checks are obsolete, there remain some situations where they are not just handy but vital.

16
Comment #6 by jshannon posted on
jshannon
If there is any deadline on a bill, paying by internet bank is not reliable since they won't be held responsible if your paper check is late and you incur a late fee. Been there, done that..and won't again, if there is a deadline. Or, you better send payment several weeks in advance. Your mileage may vary.

 

4
Comment #9 by Greg (anonymous) posted on
Greg
Go to your local credit union. Great rates no hassels.

2
Comment #10 by AtHomeDad (anonymous) posted on
AtHomeDad
If I could minus rate these comments I would. Give it rest. Checks are rarely needed anymore, but there are still plenty of uses for them. Maybe not in everyone's world, but this website is a resource for the masses, not just a segment of the most wired and wireless among us.

Back on topic: I've been with First Internet Bank of Indiana since the late 90s, when the idea of an internet-based bank was a scary proposition to most people. Their customer service has been excellent; they offer several non-yield perks like financial tracking software, mobile banking, and more. While they don't qualify as a high yield account their interest bearing accounts are high for their respective categories, and come with minimal to few hoops.

A First IB checking account is our main account, and when combined with other accounts (for CD rates, HY Checking, online brokerage), ACH transfers, electronic bill payments, direct deposit, our financial life is seemlessly electronic. (Yet, we still [necessarily] use checks from time to time!) We use local credit union accounts for certain conveniences, targeted short-term savings goals, and a high yield checking account (for which we use the debit card for a single budget item expenditure to meet the debit requirements).

To summarize:

What's my favorite checking account?
First Internet Bank of Indiana, combined with a supplemental High Yield Checking account.

What features are most important to me?
We have mutliple accounts, some local brick and motar (credit union typically), some internet only (First IB, PenFed), and some we use both ways. We only stick with those who consistently provide relatively high rate and first class customer service.

7
Comment #12 by Anonymous posted on
Anonymous
Capital One Bank Interest Online Checking is not offered in states where Capital One branches exist. And, my plumber only accepted cash and personal checks at the time when work agreements and contracts were signed, for the deposit. I wish he accepted popmoney. Plus, my kids and grandchildren love getting my colorful-designed checks with my real signature. It's a personal touch.

3
Comment #13 by RJM posted on
RJM
The bill pay providers even tell you that you shouldnt use billpay for things like property taxes. And sending a paper check for my tag is a lot cheaper than my countys $3.95 fee for doing it online.

2
Comment #14 by Anonymous posted on
Anonymous
Inceredible Bank just dropped rates:

"... as of October 12, 2011, our online checking account rate
was adjusted to 1.06% APY and our Money Market rate has been adjusted to
1.18% APY."

2
Comment #16 by MrFrugality posted on
MrFrugality
Don't forget ClearSky from Chesapeake Bank. They have maintained top rates during the past years for regular checking. Currently >$25K up to $250K pays 1.00% APY and .80% APY below 25K. No minimums, no fees,  free bill pay, free debit card usage and waves up to $20 in ATM fees each month. Good service, fast ACH. And it can be linked to their savings account which currently pays a comparatively high 1.06% APY ($1 up). It is a paperless checking account, however, if that is an issue for you.

3
Comment #17 by Anonymous posted on
Anonymous
Many of the people who are moving their accounts, credit cards, and mortgages from the large banks are doing so because they don't want to support a too-big-to-fail bank, not JUST because of the fees. It would have been useful for the author to discuss this as well. E.g. Ing is owned by Capital One.

2