Bothersome bank fees can add up, which only encourages desperate financial institutions to try to collect even more of them. For example, Bank of America recently announced plans to charge a $5 monthly fee for debit card use. Thankfully, a customer revolt put a stop to that, and similar plans by Chase and Wells Fargo, to name but two.
The damage was already done, though, as fee-free Internet-based banks saw a huge uptick in customer sign-ups. Todd Sandler, head of product strategy at ING Direct, said the bank recently saw a 43 percent increase in Electric Orange checking account openings. As banks try other ways to raise more millions—such as new checking account fees, fees for excessive withdrawals from savings, and, of course, credit card interest hikes—the number of migrations to lower-cost Internet banks will only increase.
Another term for the so-called "Internet bank" is a direct bank. It doesn't have branches with tellers and drive-up windows, but customers can access money in a number of ways, including snail mail, mobile apps, telephone, Web page, and ATMs. By getting rid of the overhead of brick-and-mortar locations, the direct banks can provide better services, including higher interest rates and fewer or no fees. Customers just have to be comfortable knowing they can't walk up to a teller.
So how did we determine the best of the Internet banks? Though we didn't open up accounts everywhere, we scoured the best sources for online-banking info, sites like BankRate.com, CNNMoney, ConsumerSearch.com, and MyBankTracker, to see what they considered the best. Our list aggregates those Internet banks with multiple mentions and the best user ratings.
Let's face it, no bank is perfect. It's your money they're playing with over there, after all. But that said, we're confident you'll see the least risk picking one of these direct bank institutions for your funds. All five listed here are members of FDIC, except Connexion, which is member of NCUA.
Ally Bank
www.ally.com, 1-877-247-ALLY
Minimum needed to open account: None
Monthly Fees: None
ATM Fees: None – fees charged by other banks are automatically reimbursed at end of the month
Interest Checking: Yes – 0.50% interest on average monthly balance under $15,000; 0.80% interest on balance over $15,000
Online Savings: 0.85% variable APY
Other Fees: $9 for overdraft, $15 for stop payment
Free transfers with other banks, free use of the Popmoney service to transfer funds to friends and family via their email or phone number, free deposit of checks you scan in yourself. Sensing a pattern? Ally Bank offers lots of free services unimaginable with other banks. There's the usual litany of IRAs, money markets, CDs and of course, automobile loans, but the hallmark of Ally is a high-interest online savings account and interest checking. While the MasterCard debit card also has a cash back program with selected retailers, Ally puts the money right back in the account when you spend with the card.
www.ally.com, 1-877-247-ALLY
Minimum needed to open account: None
Monthly Fees: None
ATM Fees: None – fees charged by other banks are automatically reimbursed at end of the month
Interest Checking: Yes – 0.50% interest on average monthly balance under $15,000; 0.80% interest on balance over $15,000
Online Savings: 0.85% variable APY
Other Fees: $9 for overdraft, $15 for stop payment
Free transfers with other banks, free use of the Popmoney service to transfer funds to friends and family via their email or phone number, free deposit of checks you scan in yourself. Sensing a pattern? Ally Bank offers lots of free services unimaginable with other banks. There's the usual litany of IRAs, money markets, CDs and of course, automobile loans, but the hallmark of Ally is a high-interest online savings account and interest checking. While the MasterCard debit card also has a cash back program with selected retailers, Ally puts the money right back in the account when you spend with the card.
ING Direct
www.ingdirect.com, 1-800-ING-DIRECT
Minimum needed to open account: None
Monthly Fees: None
ATM Fees: Free at 43,000 Allpoint-affiliated ATMs, otherwise fees from the ATM-owning bank apply
Interest Checking: Yes (called Electric Orange Checking) – 0.19% interest on average monthly balance under $50,000; 1.05% interest on balance over $50,000; 1.10% over $100,000
Online Savings: 0.90% variable APY
Other Fees: A nominal 3.1₵ a day on over draft balance of $100
Electric Orange Checking comes with free transfers for up to three linked bank accounts, free online bill payment (including free postage if they mail a check for you), person-to-person payment service to send funds directly to other bank accounts, and a MasterCard debit card. ING also offers mortgage services, but no car loans. If you like to walk into your bank, ING has a modern equivalent—eight ING Direct Cafés in major cities (Chicago, Honolulu, Los Angeles, New York, Philadelphia, St. Cloud, Wilmington, and San Francisco) where baristas double as bankers. ING Direct also has free iOS apps for banking and finding ATMs.
www.ingdirect.com, 1-800-ING-DIRECT
Minimum needed to open account: None
Monthly Fees: None
ATM Fees: Free at 43,000 Allpoint-affiliated ATMs, otherwise fees from the ATM-owning bank apply
Interest Checking: Yes (called Electric Orange Checking) – 0.19% interest on average monthly balance under $50,000; 1.05% interest on balance over $50,000; 1.10% over $100,000
Online Savings: 0.90% variable APY
Other Fees: A nominal 3.1₵ a day on over draft balance of $100
Electric Orange Checking comes with free transfers for up to three linked bank accounts, free online bill payment (including free postage if they mail a check for you), person-to-person payment service to send funds directly to other bank accounts, and a MasterCard debit card. ING also offers mortgage services, but no car loans. If you like to walk into your bank, ING has a modern equivalent—eight ING Direct Cafés in major cities (Chicago, Honolulu, Los Angeles, New York, Philadelphia, St. Cloud, Wilmington, and San Francisco) where baristas double as bankers. ING Direct also has free iOS apps for banking and finding ATMs.
PerkStreet
www.perkstreet.com, 866-792-2834
Minimum needed to open account: None
Monthly Fees: None
ATM Fees: Free at 37,000 STARsf®-affiliated ATMs, otherwise fees from the ATM-owning bank apply. (STARsf® is not the same as STAR so check the online ATM locator.)
Interest Checking: Not really – there's no minimum balance, but there's also no annual percentage yield (APY) on accounts, just perks (see below)
Online Savings: No savings available
Other Fees: $25 overdraft, $4.50 per month for inactivity, $15 stop payment
As the name implies, PerkStreet is all about the perks. You don't get an interest-generating checking account, but instead, checking with a MasterCard debit card that loads on the rewards. For the first 90 days, you'll get 2% cash back on all purchases (made without using your PIN). Some retail partners offer 5% back (and PerkStreet announces them via Twitter@perkstreet). After the first three months, you can still get that same cash back deal as long as your account balance stays above $5,000; otherwise it drops to 1% cash back. If you don't like money, PerkStreet will reward you with music or coffee. Like the others, you can link separate checking accounts to PerkStreet for free transfers, and pay bills online.
www.perkstreet.com, 866-792-2834
Minimum needed to open account: None
Monthly Fees: None
ATM Fees: Free at 37,000 STARsf®-affiliated ATMs, otherwise fees from the ATM-owning bank apply. (STARsf® is not the same as STAR so check the online ATM locator.)
Interest Checking: Not really – there's no minimum balance, but there's also no annual percentage yield (APY) on accounts, just perks (see below)
Online Savings: No savings available
Other Fees: $25 overdraft, $4.50 per month for inactivity, $15 stop payment
As the name implies, PerkStreet is all about the perks. You don't get an interest-generating checking account, but instead, checking with a MasterCard debit card that loads on the rewards. For the first 90 days, you'll get 2% cash back on all purchases (made without using your PIN). Some retail partners offer 5% back (and PerkStreet announces them via Twitter@perkstreet). After the first three months, you can still get that same cash back deal as long as your account balance stays above $5,000; otherwise it drops to 1% cash back. If you don't like money, PerkStreet will reward you with music or coffee. Like the others, you can link separate checking accounts to PerkStreet for free transfers, and pay bills online.
Connexus Credit Union
www.connexuscu.org, 1-800-845-5025
Minimum needed to open account: None
Monthly Fees: None
ATM Fees: Reimbursement for up to $25 a month in ATM fees incurred
Interest Checking: Yes (called Xtraordinary Checking) with 2.0% APY up to $25,000, but with caveats
Online Savings: Regular savings accounts like Holiday Club, a kids account (Koala Youth Club), others with minimum balances
Other Fees: $10 to open an account (if you're not eligible); overdraft fees
Wisconsin-based Connexus, the credit union for those related to Liberty Mutual insurance, UMR, and NorthCentral Technical College, is open to anyone who wants to pay a $5 fee and $5 donation. For that, your interest checking account includes free mobile banking, phone banking, bill payment, and a very good APY. Of course, there are some rules: you must use your VISA debit card at least 15 times for purchases (without the PIN) and make one direct deposit each month. If you don't, the APY is only 0.25%. Connexus also offers checking accounts with fewer caveats but also a lower APY (or none, if you just want it free). As a full-fledged CU with branches in Wisconsin, Ohio, and New Hampshire, Connexus also has mortgage, home equity, student, and personal loans.
www.connexuscu.org, 1-800-845-5025
Minimum needed to open account: None
Monthly Fees: None
ATM Fees: Reimbursement for up to $25 a month in ATM fees incurred
Interest Checking: Yes (called Xtraordinary Checking) with 2.0% APY up to $25,000, but with caveats
Online Savings: Regular savings accounts like Holiday Club, a kids account (Koala Youth Club), others with minimum balances
Other Fees: $10 to open an account (if you're not eligible); overdraft fees
Wisconsin-based Connexus, the credit union for those related to Liberty Mutual insurance, UMR, and NorthCentral Technical College, is open to anyone who wants to pay a $5 fee and $5 donation. For that, your interest checking account includes free mobile banking, phone banking, bill payment, and a very good APY. Of course, there are some rules: you must use your VISA debit card at least 15 times for purchases (without the PIN) and make one direct deposit each month. If you don't, the APY is only 0.25%. Connexus also offers checking accounts with fewer caveats but also a lower APY (or none, if you just want it free). As a full-fledged CU with branches in Wisconsin, Ohio, and New Hampshire, Connexus also has mortgage, home equity, student, and personal loans.
Bank of Internet USA (BofI)
www.bankofinternet.com/bofi, 1-877-541-2634
Minimum needed to open account: $100 to open an account ($500 to avoid future monthly fees)
Monthly Fees: None
ATM Fees: Unlimited ATM reimbursement with Rewards Checking; up to $8 a month with High Interest Checking
Interest Checking: Yes – either 0.71% APY (High Interest) or 1.25% APY (Rewards Checking) with usage caveats
Online Savings: High Yield Savings is 0.80% APY with no fees and no minimum
Other Fees: $35 for stop payments
Calling itself "America's Oldest and Most Trusted Internet Bank," BofI is over a decade old. It layers on the extras, including the Popmoney funds exchange (same as Ally's), free bill pay, banking by phone/email/SMS alert, a Quicken-powered tool called FinanceWorks for budgeting, and purchase rewards for using your VISA debit card. If you want to avoid the minimum balance and maintenance fees you can, but that'll require a $500 minimum opening deposit. To get the full 1.25% APY, you must have direct deposit from your employer, pay up to three bills, and use the debit card seven times per month. Overdraft protection, either from a line of credit or from a linked account, costs nothing—except the $50 application fee to activate it.
www.bankofinternet.com/bofi, 1-877-541-2634
Minimum needed to open account: $100 to open an account ($500 to avoid future monthly fees)
Monthly Fees: None
ATM Fees: Unlimited ATM reimbursement with Rewards Checking; up to $8 a month with High Interest Checking
Interest Checking: Yes – either 0.71% APY (High Interest) or 1.25% APY (Rewards Checking) with usage caveats
Online Savings: High Yield Savings is 0.80% APY with no fees and no minimum
Other Fees: $35 for stop payments
Calling itself "America's Oldest and Most Trusted Internet Bank," BofI is over a decade old. It layers on the extras, including the Popmoney funds exchange (same as Ally's), free bill pay, banking by phone/email/SMS alert, a Quicken-powered tool called FinanceWorks for budgeting, and purchase rewards for using your VISA debit card. If you want to avoid the minimum balance and maintenance fees you can, but that'll require a $500 minimum opening deposit. To get the full 1.25% APY, you must have direct deposit from your employer, pay up to three bills, and use the debit card seven times per month. Overdraft protection, either from a line of credit or from a linked account, costs nothing—except the $50 application fee to activate it.
