Leaving Your Big Bank and Choosing an Internet Checking Account
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
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.
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).
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.
"... 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