With ING Direct finally launching CheckMate for online check deposits, it becomes easier to use ING Direct for all of your banking. There are fewer reasons that you need a local brick-and-mortar bank. However, there's one reason to keep your local bank. It's much easier to make cash deposits. Most all internet banks allow you to deposit checks by mail, but that's not an option for cash.
Local Bank or Credit Union
My preferred method to deposit cash into my internet bank is to first deposit the cash into my local credit union or bank account. I can then initiate an ACH bank-to-bank transfer from my internet bank. This might not be a good option for some people who don't live close to their bank or credit union. With many banks adding monthly fees, people may be closing their accounts at their local banks.
Deposit Taking ATM
Another option for cash deposits is using an ATM that can handle cash deposits. Big banks like Chase and Bank of America have ATMs that can take cash. Some ATM networks like MoneyPass also have some ATMs that can accept cash. Even if your bank or credit union has a nearby ATM that accepts cash, you may not want to use it. If the ATM gets jammed when you feed it your bills, it can be a hassle to resolve the issue.
Mailing a Money Order
Another way to deposit cash into an internet bank account is by first purchasing a money order. Then you can mail the money order to the internet bank just like a check. One problem with this is that it usually costs money to purchase a money order. For example, the U.S. Post Office charges up to $1.55. Some people may have access to cheaper options. If you live in Florida, Amscot - The Money Superstore offers free money orders. My guess is that Amscot uses free money orders as a marketing strategy to attract more customers for their cash advance service.
Not all internet banks accept money orders. ING Direct is one that does not accept money orders for deposit. I just confirmed that by email last week. I checked with several other internet banks with popular checking accounts, and all of them say that customers can mail money orders for deposit. These include Ally Bank, EverBank, Bank of Internet USA, Incredible Bank and Clear Sky Accounts.
The only internet bank that I've found to provide a cash deposit option is PerkStreet Financial. They have a contract with MoneyGram which has 18,000 locations nationwide, including every Wal-Mart store. You can deposit cash into your PerkStreet checking account via a MoneyGram Express Payment. PerkStreet picks up the fee.
Consider a Local Bank or Credit Union Account
There are some advantages in having a local brick-and-mortar bank or credit union. If you want to avoid monthly fees without a large balance at a big bank, you may want to consider a plain savings account. These sometimes have smaller minimum balance requirements. One example is Chase Bank which waives monthly fees on its Chase Savings account for a minimum daily balance of $300. Bank of America also has a $300 minimum balance requirement to avoid a monthly fee on its Regular savings account. Don't forget that all savings accounts limit certain withdrawals to a maximum of 6 per month. Some banks will hit you with a fee for even fewer withdrawals. For example, Bank of America charges a fee for more than 3 withdrawals per month.
If you want to avoid the big banks, consider a credit union. Most credit unions have free checking accounts with no monthly fees. Also, many credit unions are part of a shared branch network (CU Service Centers). For more information, please refer to my post Finding the Best Free Checking Accounts at the Best Credit Unions.
In addition to making cash deposits, there are other reasons that it can be helpful to have a local bank or credit union. Some offer free notary service, free coin counting machines, and paper shredding. What services do you use at your local bank or credit union?